How to Manage Equipment Rental Costs
In the quest to optimize expenses in equipment rentals, we’ve gathered insights from CEOs and operations managers, among other experts. They share eight cost-saving strategies, ranging from consolidating rentals for volume discounts to investing in rental equipment protection, to help you effectively manage and control these costs.
- Consolidate Rentals for Volume Discounts
- Plan Rentals with Project Materials
- Negotiate Bulk-Rate Discounts
- Analyze Rental vs. Ownership Costs
- Schedule Equipment Downtime
- Create Shared Equipment Pools
- Cultivate Long-Term Supplier Partnerships
- Invest in Rental Equipment Protection
Consolidate Rentals for Volume Discounts
The key to effectively managing the cost of equipment rental lies in meticulous planning, strategic selection, and ongoing management of rental agreements. A cost-saving strategy that has proven effective is the consolidation of equipment rental needs and negotiation of agreements with a single supplier or a select few suppliers. This approach leverages volume to achieve better pricing, terms, and conditions.
Begin by conducting a thorough assessment of your equipment rental needs over a specific period, such as a quarter or a year. This forecasting should consider the types of equipment, duration of rental periods, and anticipated usage levels. Then, Identify potential suppliers who can meet your equipment needs and invite them to submit proposals. Look for suppliers with a broad range of equipment and a reputation for reliability and service quality.
With a clear understanding of your consolidated rental needs, enter into negotiations with the selected suppliers. The goal is to secure volume discounts, favorable terms (such as flexible rental periods and reduced rates for longer commitments), and additional benefits (such as maintenance and support services included in the rental cost). Also, manage all equipment rentals through a centralized system or designated team member.
This centralized management ensures oversight of all rental agreements, timely returns to avoid unnecessary charges, and adherence to maintenance schedules to avoid repair fees. Implementing this strategy in a construction business, for example, involved detailed planning of project timelines and equipment needs, followed by negotiations with a shortlist of suppliers.
By presenting a comprehensive and consolidated demand for equipment rentals over multiple projects, we were able to secure discounts of up to 20% on standard rental rates, along with more flexible terms that accommodated the unpredictable nature of construction projects.
Michael Dion
Chief Finance Nerd, F9 Finance
Plan Rentals with Project Materials
As a roofing and exteriors company based out of Colorado, we often need to rent equipment. Because we replace roofs, siding, gutters, and windows on multi-family and commercial buildings, equipment is frequently required to reach the heights necessary for these replacements. Many of these lifts and pieces of heavy equipment are outside the price range that makes sense for us to purchase.
The main factor we have found to make this a stress-free and affordable part of our jobs is adequate planning. Unfortunately, we have experienced the price increases and availability issues associated with last-minute decisions firsthand.
Because of that, when we are completing a project that will require the use of rental equipment, a member of our team begins the process of equipment rentals during the stage of the project where we are ordering materials. Once we know when the materials will arrive, the rental is immediately scheduled. This allows us to call around and shop for prices, check the costs of delivery, and ensure we have the best option for the job we are doing.
Once we have determined the best rental price for the necessary equipment, we do our best to have the equipment on-site only as necessary. Not only is it a waste of money to pay for equipment for a longer time period than needed, but being efficient in your use also lowers the amount of time that the rental equipment is in your possession and at risk of damage or theft for which you could be responsible. It has been our experience that good planning is the key to saving money on equipment rentals!
Niki Obrien
Operations Manager, Custom Exteriors
Negotiate Bulk-Rate Discounts
The key thing in managing equipment rental costs is using the same company for everything so you can negotiate a better deal. Clients that spend more money are in a position to get a “bulk-rate” discount. Rental companies aren’t any different from any other business when it comes to that type of discount. However, you must ask for it and be willing to negotiate.
Steve Mascarin
CEO, Taunton Village Dental
Analyze Rental vs. Ownership Costs
As a commercial photography company, our cost-saving strategy for managing costs associated with equipment rentals is to analyze our data and forecast sales to determine if renting or owning is more favorable.
For every invoice we send to a client, there is an equipment fee attached, whether it’s for rental equipment or wear and tear on our own equipment. Every few months, we’ll analyze how many times we’ve had to rent a specific piece of equipment and compare the cost against the purchase price. We’ll also make some predictions based on past trends of how often we anticipate needing to rent a certain piece of equipment, as well as determine how much more of a service we would sell and promote if the equipment was readily available.
In some cases, we determine that it’s best to keep renting a piece of equipment, as it’s not used enough to warrant the purchase price. With the client covering the rental costs, we aren’t losing any money like we might if we purchased it. While in other cases, it makes sense to purchase and even put it on a loan program with interest rather than continue to rent. By determining how long it will take to break even on the piece of equipment, we can make a decision based on data.
Megan Lowdon
Director of Operations, Robert Lowdon Photography
Schedule Equipment Downtime
It is essential for us to fully utilize our resources to their fullest potential to optimize efficiency and even save money. The same goes for construction equipment. So, you should schedule regular downtime to reduce costs in this way.
In general, most types of construction equipment rentals have usage restrictions in place to keep up with safety and compliance standards. Many of them are not prepared to handle 24 hours of non-stop usage. So, pushing them over the limit can cause internal damage or complete system failure.
Fixing or replacing them will later incur high costs. Instead, scheduling downtime regularly will both extend the lifespan of your equipment and avoid any delay in production, thereby saving costs further.
Personally, I ensure planning downtime for all our office equipment to improve efficiency and reduce any unnecessary costs. In terms of intensive equipment rentals, too, it is best to organize timely downtime for effective preventive maintenance.
Lyle Solomon
Principal Attorney, Oak View Law Group
Create Shared Equipment Pools
To enhance our cost management in equipment rentals, we have embraced technological advancements in inventory management software. These systems allow us to track our equipment in real-time, anticipate the needs for future projects, and make informed decisions on rentals versus purchases based on cost-benefit analyses.
A particularly effective cost-saving technique we’ve adopted involves establishing partnerships with other businesses in similar sectors to create a shared pool of rental equipment. This initiative promotes cost-sharing and reduces individual investment, leading to significant savings without compromising the availability of necessary equipment for our operations.
Rick Elmore
CEO, Simply Noted
Cultivate Long-Term Supplier Partnerships
Effectively managing equipment rental costs involves careful planning and strategic measures. Start by assessing your project needs accurately to avoid unnecessary expenses.
One effective cost-saving strategy in managing equipment rental costs is to establish strong relationships with reliable providers. Cultivating a long-term partnership can score you better rates, improved terms, and even priority service.
Keep the channels of communication wide open; talk about your project needs, explore potential discounts, and negotiate terms that work in your favor. This not only builds a mutually beneficial connection but also increases the likelihood of snagging cost-effective deals.
Peter Reagan
Financial Market Strategist, Birch Gold Group
Invest in Rental Equipment Protection
Protecting your rental equipment is one of the best investments you can make that will save you money in the long run. I’m talking about insurance, software, and ARA registration, which are all necessary for your protection. When you rent out equipment, the people who rent it can sometimes be the biggest risk to its condition. They might break it or lose parts, which can hurt your main way of making money.
If you just use simple methods to keep an eye on your equipment while it’s with your clients, you might not get the full picture. You could find out too late that a client damaged something, and you might end up paying for repairs yourself or blaming the wrong person.
Good equipment rental software can help you avoid these problems. It gives you a clear, written record of what shape your equipment is in before you give it to your clients. Besides picking the right software for checking your equipment, you can also sign up with the American Rental Association (ARA). If you’re a member of the ARA, you can add up to 1,000 of your machines that can be moved and are used off-road to the National Equipment Register’s list. Police can look at this list any time, day or night, and it helps them find your stuff faster if it’s reported stolen.
Make sure to keep good records. Keep track of who your clients are, how to contact them, and how to identify them. Get insurance. This protects your business from losing money and equipment. Make sure your insurance covers things like theft, damage, and lost income.
Eric Croak, Cfp
President, Croak Capital
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