Optimal rental fleets take shape in equipment industry
Equipment rental market revenue projected to hit $87.5B in 2025
Dealers and rental houses are optimizing their rental fleets by evaluating the average equipment age and product mix to determine what works best.
The American Rental Association is projecting the equipment rental market to hit a record $87.5 billion in revenue in 2025, with continued growth of 4.1% in 2026. Rental penetration also reached a record 57% in the first quarter, according to EquipmentWatch.
In the increasingly competitive market, fleet age has become a major component of rental companies’ strategies, Josh Nickell, chief executive at Atlanta-based Northside Tool Rental, told Equipment Finance News. The average rental fleet age is generally between 30 months and 40 months, but it’s crucial to understand how this varies based on the market and equipment type, he said.
“If it’s a really competitive market, you might have to have a little bit newer equipment,” he said. “And then the type of equipment matters. If you had, let’s say, a 5,000-pound warehouse forklift, you could have one of those that’s 15 or 20 years old. And as long as you’ve refurbished it well, where you’re repainting it, changing the chains, you’re keeping it in great shape… you might hardly know the difference between a brand new one and one that’s 10 or 15 years old.”
Conversely, equipment types such as mini skid steers typically have shorter lifespans due to more wear and tear, making newer models easier to rent.
Having a mix of newer and older equipment also helps rental companies appeal to a range of customers who may prefer specific model years, Drew Dobson, general manager at Kersey, Pa.-based GM Equipment Rentals, told EFN.
“It’s nice to have some of that older gear in your fleet that’s been tried and true and you’ve already worked the bugs out of,” he said.
For example, many sky glazier companies request older boom lifts because newer models have sensitive load sensors that cause machines to shut off, even if the load is one pound over weight capacity, he said.
“Whereas the older machines were designed to kind of operate outside of that envelope a little bit,” Dobson said. “And [aerial workers] are used to using that type of equipment to get their job done.”
Dealers lean on leasing, captive finance support
Meanwhile, equipment dealers using short-term rentals to drive sales could be better off with a fleet age averaging less than 30 months because they can “sell it out while it still has warranty on it,” Terry Dolan, head of CNH Construction North America, told EFN.
“When you talk about average age, one of the other ways that dealers build rental fleets is through leasing,” he said.
For example, a dealer may lease out a new piece of equipment to a contractor for two or three years, “and at the end of that lease, they’ll actually buy those assets that’s got 1,000 hours on it, 1,200 hours on it, and [dealers] will put it into their rental fleet,” Dolan said. “So that enables them to get a lower-cost unit into the rental fleet that they know they can take care of, they have the parts, service for, etc.”
Productivity Plus, a financing program offered by CNH Industrial Capital that provides lines of credit for purchasing parts, attachments and rental equipment, also helps dealers maximize their rental fleets and manage risk, Dolan said.
“If dealers have made a significant investment and all of a sudden they have a glut of iron come back, by having a captive finance company, we can help them manage what those payment streams may look like,” he said.
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