Growing rental activity presents opportunity for dealers, lenders

Equipment dealers and lenders are looking to capitalize on growing demand for rental equipment as the used-equipment market adjusts ahead of 2025 

Rental activity is growing despite the potential concern that it may remove buyers from the market, Donna Yanuzzi, executive vice president of 1st Equipment Finance, said this week during the Equipment Finance News webinar, “Used equipment financing in 2025 as markets normalize.”

Watch the webinar here. 

“We’re seeing actually the dealers use pay-per-use,” she said. “We’re seeing a strong rental side of the industry where that takes a buyer out of the market.” 

Pay-per-use and rental activity is increasing for dealers and rental companies, Justin Jones, corporate sales manager at Nashville, Tenn.-based Diamond Equipment, said during the webinar. 

“The rental [market has] been on the uptick for years now and we continue seeing it gain,” he said, adding that he was unsure if the renters were “completely” out of the buying market. 

Rental market growth 

In line with Jones’ comment, Sunbelt Rentals grew its U.S. rental revenue to $2.2 billion, up 6.2% year over year, according to the company’s Sept. 3 earnings release.  

Meanwhile, construction and general tool rental revenue for 2024 is expected to be $78.7 billion, up 8.9% compared with 2023, according to the American Rental Association’s third quarter economic forecast released Aug. 2. The forecast also projects 5.3% YoY growth in 2025. 

While renting used equipment instead of immediately selling it takes traditional equipment financing off the table, lenders have other financing options, Yanuzzi said. 

“We’ve been talking to our vendors in construction equipment to finance their rental fleets and then we give them an opportunity if they’re selling that piece,” she said. “We give them a special rate for that particular customer that wants to buy that equipment, since they have rental money in it.” 

Rental facilitates more sales 

While other companies look to rental as a primary business model, Diamond Equipment and other dealers use rentals as short-term plays to facilitate sales, Jones said. 

“When we rent something from the dealership side of things, we’re constantly looking for that customer to be renting it for six to eight months and then we’re trying to convert it into a sale,” he said. “We look at rentals a little bit differently than Sunbelt or United Rentals, but we still do rent and hopefully we will see a little bit more of an increase on our rental portfolio.” 

Lenders can finance the growing rental fleet as well as the eventual purchase as an additional revenue stream, Yanuzzi said. 

“We extended that loan offer rather than just doing your rental fleet,” she said. “The other side of it, you can make that and beef that up a little bit to steer business my direction.”