The appeal of renting equipment and renting for longer terms is increasing among contractors because of “the uncertainty created by the economic downturn of the last few years and an unwillingness to commit to purchases, given the work situation,” says Sidney Sexson, senior vice president at Wells Fargo Equipment Finance, Tempe, Ariz.
Scarce new development activity amid tight lending conditions has ratcheted up the rivalry among job-hungry contractors, leaving more firms vying for fewer projects. The increased competition has narrowed already slim bidding margins, forcing contractors to eke out a financial edge wherever possible. For some firms, that has meant renting rather than buying. Equipment rentals allow contractors to shift downtime risk while trimming expenses, including licensing, insurance, taxes and debt, among others.
The U.S. rental business grew an estimated 18.6% in 2011, according to the Associated Equipment Manufacturers, a Milwaukee-based industry trade group. This year, North American equipment rentals are expected to generate $33.5 billion in revenue, an increase of 6.9% and more than three times the expected growth rate of the U.S. economy, says the Moline, Ill.-based American Rental Association. Rentals offer a flexible, safe solution as the economy makes a jagged recovery.