Commercial and Industrial Equipment Rental
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Industry Overview
The US commercial and industrial equipment rental industry includes more than 8,000 companies with combined annual revenue of about $42 billion. Major companies include United Rentals, Sunbelt Rentals, and Hertz. The industry is concentrated: the top 50 companies account for more than half of overall revenue.
Competitive Landscape
Demand is driven by economic growth, particularly in nonresidential construction. The profitability of individual companies depends on the merchandising mix and cost of financing rental inventory. Large companies have economies of scale advantages in buying equipment and having multiple outlets to share equipment. Small companies can compete effectively by providing specialty products for a local market and superior customer service.
Products, Operations & Technology
Major rental product categories are heavy construction equipment (26 percent of revenue); aircraft (11 percent); computers and peripheral equipment (11 percent); medical equipment (8 percent); and railroad cars (8 percent). Other rental product categories include audio/visual and motion picture and theatrical equipment.
Businesses rent rather than buy equipment due to the equipment's high cost or to meet a temporary business need. Commercial rental companies typically don't operate store-front facilities and are located in industrial zones. Company sites are generally about three acres and have a storage yard for the equipment, a maintenance center, offices, and, sometimes, a showroom. Companies can stock hundreds of items or specialize in a niche and provide just a few dozen items. Companies use full service leases where they maintain ownership of equipment and service it. Rental companies often deliver their equipment to customer sites and retrieve it at the rental conclusion. Some companies also provide maintenance and supplies for tools and equipment their customers own.
Rental equipment companies buy equipment from a variety of manufacturers. Because commercial and industrial equipment is expensive, companies generally finance inventory with financial service companies. Rental equipment is recorded at cost and depreciated over the estimated useful life, generally one to 10 years. Salvage values are generally only about 10 percent of the purchase price. Some companies have relationships with used equipment dealers to dispose of depreciated equipment, or have their own used equipment business.
Computer systems support inventory management, ordering, bill processing, and equipment sharing among locations. Companies have created websites that both showcase inventory and allow online rentals. GPS is increasingly being used to track large pieces of equipment between customer sites to better schedule service and maintenance.
