How Construction Equipment Rental Business is Increasing Now?

Construction Equipment (CE) rental business’ popularity has increased due to a variety of reasons. A few key contributors to the growth of CE rentals include the rising cost of purchasing equipment, increasing economic uncertainty, lack of capital, technology upgradation, unpredictable construction and infrastructure growth, depreciation woes, costly breakdowns and limited space availability which has forced construction companies to find ways to save money wherever they can. In many instances, renting has become a viable option for many companies and has provided them the ability to cut costs and run a more financially stable construction business.

Today, many CE users are preferring to rent CE or ‘pay-as-use’ model as an optimal way to do business. This has proved beneficial for the CE market because with more financing of CE and the increased use of rentals, their demand has only increased. At present, the Earthmoving and Construction Equipment (ECE) rental market is only 7-8 per cent of the total ECE market in the country, but the percentage is set to increase and the rental industry is expected to grow at the rate of 30 per cent per year in the future. Particularly, the rental market is expected to pick up in Tier-2 and Tier-3 cities of the country.

Here are some of the benefits of renting CE which is leading to an increase in the CE rental business in the country...

1. Helps in avoiding the initial purchase cost: Purchasing new equipment always demands huge investments as they are expensive and hence can affect your company’s budget. Also, purchasing CE is a long-term investment. However, renting CE can help in avoiding the upfront costs associated with purchasing and thus, you can better allocate your financial resources.

2. Protects you from the market fluctuations: Given that the construction sector is highly dynamic and many things may influence the market, the rising or sinking cost of the equipment can highly affect your business. In such scenarios, renting CE can provide a cushion to your company from the unforeseen financial downturns that may arise due to multiple reasons. Renting CE is always a flexible option that makes it easier for you to handle the rise and fall of the market forces.

3. Leads to less maintenance and repair costs: The two costs need to be accounted for when you own a equipment. On the other hand, although the maintenance and repair is important for rental equipment too, still the cost is significantly lowered compared to purchased equipment. In fact, if you opt for renting CE, then you need not worry about the expensive breakdowns at all as most of the times, this will be taken care of by the rental company. This can also free up your considerable amount of time, labour and cost required for maintenance. Thus equipment rentals can help to keep your project up and running without any delays.

4. No depreciation costs associated with rental Construction Equipment: As soon as you purchase any equipment, it starts to depreciate. So, when you own CE, you may have to incur considerable depreciation costs and as the value of the equipment depreciates, it makes it more difficult to recover the initial purchase cost. Further, as the technology advances, there is always the risk of your equipment becoming obsolete. Hence, it is always better to rent the equipment as it is the rental company that assumes the risk of the asset completely and it’s drastically losing value.

5. Saves transportation costs: Renting CE help you save the transportation cost as well. This is because you would not have to send the equipment to different project sites, which in turn can save your time and project’s productivity and efficiency. For example, if the worksite is far away from the primary location or the location where the equipment is stored, then the major logistical hurdle is transportation of the equipment which can be very expensive and time- consuming. In such a case, rented CE can remove the burden of contractors completely since the equipment can be delivered by the rental company to the worksite directly. Thus, construction companies can easily rent specific equipment for particular jobs at different project sites and get their work done without experiencing any logistical delays.

6. Solves equipment storage issues: If you purchase a equipment, then you need to ensure that you have a storage solution for it too. This is to store the equipment when not in use as the equipment kept in open may deteriorate easily and depreciate faster. The proper warehouse or storage space may mean additional cost for the construction companies. It is also often seen that after completion of the project, the machinery mostly remains idle till the next project. However, during this time also, the construction company has to bear expenses related to maintenance and repair. These expenses can be ruled out in the case of rented equipment as after completion of the project, the equipment can be sent back to the rental company. This saves your storage costs considerably.

7. Helps completing short-term projects fast: Many times, short-term projects or one-off jobs need specialised equipment. For these projects, taking CE on rent can be a smart option. The equipment can be returned to the rental company once the job is done.

8. Supplements the existing fleet during busy season: It is not uncommon for particular projects to place excessive demand on the resources that exceed routine operations. Obviously in such cases, it’s much more cost effective to rent CE as they can supplement capacity on an as-needed basis. Also, through this way, you can avoid the problem of storing and maintaining the equipment during slow season.

9. Puts an end on worries related to resale: When buying expensive equipment, the major concern is its resale value because of the fact that the value of a piece of machinery drops considerably as soon as it is bought and technological advances can make it obsolete. In case of rented equipment, this is not at all the cause of worry.

10. Reduces capital investment: Last but not the least, renting a piece of CE is always a smaller expense and thus, it has much less impact on the bottom line. The total rental cost can be calculated by taking rental rate (per year/month/day) x rental period (number of years/months/days) + pickup/delivery charge.

Thus, due to the above factors, rental equipment business in India is witnessing strong growth. In fact, today, prominent CE manufacturers in India have started setting up their own equipment rental distribution business. While there are many big CE manufacturing companies providing equipment on rent, Mahindra Construction Equipment with Mahindra EarthMaster backhoe loaders deserves a special mention.

When it comes to renting CE, the unique proposition of MCE include robust, maintained and technologically advanced equipment at affordable rates; trained, competent and experienced manpower resources with the equipment, 24*7 service support, onsite repairs and maintenance to reduce machine downtime and production loss at customer site, advice on equipment suitability based on applications and training of operator level personnel for various industries.

In a nutshell

Overall, with the construction companies seeing the benefits of renting CE, the rental equipment market in the country is growing at a fast pace and is expected to see a boom further in the coming years.