A Comprehensive Guide to Budgeting for Rental Equipment in Construction
You need the right tools to produce great work. Whether you choose to buy or rent heavy machinery, the cost of equipment is an important part of every project budget. Understanding what goes into determining rental costs can help you maximize revenue and improve your profit margins on even your toughest jobs.
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How to Make Sure Your Rental Equipment Fits Your Budget
Here's a quick overview of the most important considerations you'll need to make when budgeting for rental equipment.
1. List Your Needs
First, evaluate the scope of your project and make a comprehensive list of all the construction activities at each phase. Knowing what tasks you will need to perform can help you determine your ideal specifications such as equipment type and size for maximum productivity.
You'll also want to consider typical jobsite conditions in your evaluation as different equipment models work best in specific environments. For example, if your jobsite is near a residential area, you may want to find a machine that can help you keep noise levels down.
2. Determine Your Rental Period
The length of time you rent a piece of equipment has a major impact on your rental costs. Typically, you'll be able to rent on either a daily, weekly, or monthly basis — and it's important to remember that each dealer will offer different pricing for each. For example, one rental provider might reduce rates for longer contracts while another may stick to flat rates.
That said, make sure you have realistic expectations for how long your project will take. A project with a broader scope will naturally require more time to enable the highest quality work. It can help to slightly overestimate your rental period to ensure you won't need to pay extra to extend it later.
It's important to ask each dealer for more information on their business terms to help you plan more effectively. You might find that the most cost-effective contract duration is different from what you expect. Or you might choose to take advantage of flexible return dates, which helps you save money by allowing you to return your equipment as soon as you finish with it rather than letting it sit idle on your jobsite until the agreement is over.
3. Talk to Your Crew
It's important to get input from your operators before reaching out to rental companies. As the people in charge of using the equipment on a daily basis, your crew can help you determine exactly what size equipment you need for maximum efficiency. Plus, their valuable insight into what tools and technologies can make their work safer and easier will narrow down your choices to specific models and brands.
4. Contact the Equipment Rental Company
Once you have a good idea of your needs — or you know what equipment you want to rent — it's time to get in touch with equipment dealers.
Some of those additional costs include:
- Labor: Whether you hire someone to operate the equipment or you do it yourself, you will always have to account for labor expenses. Some rental companies will also provide operators who are specially trained on their equipment for an additional fee.
- Operator training: Check with your rental company to see if they offer training services for their equipment.
- Tooling: Although attachments and accessories will increase your rental rates, using the right tools will make your work easier in the long run.
- Fuel and fluid: Some rental companies include fluid costs as part of a short-term rental agreement; others charge a fee for all rentals.
- Transportation: Check with your rental equipment provider to verify whether they include transportation in the rental price — often you'll pay an additional fee to get the equipment delivered. If your project involves multiple jobsites, you will likely need to transport the equipment between them yourself.
While rental equipment companies may post general pricing estimates on their websites, it's important to remember your actual rate will vary depending on factors such as model, rental duration, and location. Request a quick quote from your dealer before you rent to get the most accurate estimate for each piece you want to secure.
And if you're not sure which model you'll need for a specific task, you can always ask your dealer. They know their equipment best. Plus, they can provide the best recommendations for which machine is best for both your project and your bottom line.
5. Plan for Contingencies
Anyone who's been in the industry for a while knows that projects rarely go perfectly according to plan. Scope creep, equipment breakdowns, and inclement weather are all common obstacles that can disrupt project progress and drive up costs.
Building a contingency fund before your project begins helps prepare you for unexpected circumstances like an emergency rental due to equipment malfunction. Because you already have some money set aside to take care of the issue, you can more effectively allocate funds to other parts of your project.
6. Document Everything
Documentation is essential for keeping everyone in your company on the same page, whether they're on the jobsite or in your back office. It will also help you work toward continuous improvement by providing valuable budget data of every stage in the project.
Additionally, maintaining detailed records makes life easier for your accounting team because it helps them track your cash flow more accurately so you can make sure you're making money.
7. Adjust Your Budget As You Go
By the bidding stage, you should have a clear idea of what you'll need to spend on rental equipment. Having an accurate estimate of your equipment costs early on can actually help you win bids by making it easier to estimate your profit margins.
As your project progresses and your needs evolve, though, you'll need to make small adjustments to your budget. That's where your contingency fund will likely come in handy.
8. Conduct a Post-Rental Review
After wrapping up your project, it's important to review what went well and what didn't. And that includes your budget. Make it a point to compare your actual rental costs to your original budget so you can evaluate how accurate your estimates were. Where did you spend more than expected? Do you know why?
Document these findings and store them in an easily accessible location such as a shared company drive. This information will help you make better budgeting decisions on future projects.
What Affects Rental Costs?
Every project is different, and so is every rental provider. As a result, the daily rates you get for one job might differ significantly from the rates you get for another — even if you're renting the same piece of equipment.
Some key factors affecting rental equipment costs include:
- Equipment type: The specific type of equipment you need, including the make and model, is the biggest factor in its cost. For example, specialized tools such as air compressors and power generators often have the highest rates simply because fewer dealers carry them.
- Equipment size: Although equipment size is directly proportional to rental rates, you'll want to choose whatever size machine will produce the most efficient work.
- Available technology: While newer equipment with more advanced technology often comes with higher rental costs, these new systems can positively impact your bottom line by improving operator safety and increasing productivity.
- Rental duration: You can typically rent on a daily, weekly, or monthly basis depending on how long you'll need the equipment. Your dealer may offer reduced rates for longer contracts; it can be beneficial to ask about their pricing options.
- Location: Some markets tend to be more expensive than others due to variations in taxes, wages, and the cost of supplies.
As mentioned earlier, labor is a major cost that tends to be overlooked in rental agreements. Some rental providers have in-house operators you can hire to work for you throughout the duration of your project, but most of the time you'll either have to hire your own operator or operate the equipment yourself.
You may also need to invest in training courses to ensure your operator can use the equipment safely and effectively. Taking these expenses into account will help you come up with the most accurate budget possible.
10 Tips for Getting the Best Rental Rates
Because there are so many different factors that go into equipment rental costs, you as the renter have a certain degree of control. Here are some things you can do to ensure you're getting the best value from your rental agreement.
1. Build a Relationship With Your Dealer
One of the best things you can do to keep costs low is to find a trustworthy equipment rental provider who you can go to for any job. When you do repeat business with a reputable dealer, they'll get to know your needs and business, which will help them recommend the most cost-effective equipment for each project.
Essentially, the better your dealer knows you and your business, the better your cost savings.
Your best-case scenario is one where you enter into a lasting partnership with a dealer who has a strong network behind them like The Cat® Rental Store. The Caterpillar Rental National Account Program helps companies manage all their rentals through a single Caterpillar contact. This allows you to build a strong business partnership even if you have active jobsites in different geographic areas.
2. Know When to Buy, Rent, or Lease
Although renting is advantageous for construction companies looking to cut costs and avoid hidden fees, sometimes other options make more sense. Here's a quick overview of when each option is the most cost-effective:
- Buy: Purchasing equipment is the best option when you know you'll use the equipment often for many different projects. Although it requires a greater investment up front, it can pay off substantially over the long run.
- Rent: Renting equipment allows you to get the machinery you need without high upfront investments or hidden costs like storage fees and maintenance. It's best for projects where you know you will only need the equipment for a short time or when you need specialty equipment you rarely use.
- Lease: If you expect a project to run longer than a few months or have multiple back-to-back projects that need the same piece of equipment, leasing is likely your best bet. Many dealers also offer lease-to-own programs, which allows you to add new equipment to your fleet without needing to pay a large upfront sum.
The key here is to understand exactly what you need before you sign any contracts. If you're uncertain, ask a trustworthy rental provider for their input.
3. Plan Ahead
Proactivity is always better than reactivity, especially when it comes to rental equipment. Looking beyond your main project can help you get the most out of your rental agreement by connecting and consolidating your requirements for each job.
For example, let's say you have two jobs that you know will take two months each and have a one-month break in between. While it may seem more cost-effective to rent for two months, return the equipment, and re-rent it for the next job, it may be a safer bet to rent for the full five months. This way, you'll ensure the equipment is on your jobsite when you need it — and you might even get a discounted rate.
4. Rent From the Right Dealer
Not only does renting from the right dealer help you get the best rates, but it can also improve your ability to secure future contracts. Some key considerations to make include:
- The dealer's reputation
- Available inventory
- Number of locations within their network
- Maintenance protocols
- How long the dealer has been in business
Additionally, when you first reach out to a dealer, take the time to ask any questions you may have and note the responses you get. You'll want to make sure you know who's responsible for all the little extras like fuel, maintenance, and transportation — and you'll want to make sure you're getting honest advice from someone who knows their stuff.
5. Do Your Research
Once you know what kind of equipment you'll need, it's time to gather information on all your options. It can help to find out which rental companies your competitors use or check review sites to find out which providers are the most reliable.
If it's your first time renting, get and compare quotes to make sure you're getting the best value. Get to know how each dealer's rental process works, what the typical terms and conditions are, and what additional services each one offers so you can make the most informed choice.
6. Improve Communication Between Departments
Miscommunication between your procurement department and your jobsite is one of the biggest causes of unexpected equipment costs. Without clear visibility into your jobsite's needs, procurement might end up ordering the wrong size or machine type for the job — which can lead to costly delays and unnecessary expenditures.
It's also an issue when project supervisors go straight to the rental company without consulting with procurement. To improve transparency, you might want to consider implementing a unified technological solution that consolidates all your data and communications into one easily accessible location so everyone can keep track of what's going on and where. This way, it's easier to get the equipment you need without potentially impacting your profit margins. This may be a good place to link to our portal.The Rental Customer Portal | The Cat Rental Store
7. Return Your Equipment As Soon As You're Done
One common problem on construction sites is forgetting to return rental equipment when you are done with it. And when that happens, the equipment sits idle on the jobsite and racks up rental charges until someone finally remembers to bring it back.
Flexible rental terms are only beneficial when you take advantage of them. If you choose a rental company that offers flexible agreements, make sure to return your equipment as soon as you're finished with it so you can keep costs at a minimum.
8. Treat the Equipment Well
Most rental agreements include clauses stating that you as the renter are responsible for any breakages or damage that happen while the equipment is on your jobsite. If anything happens to it, you'll have to pay for it — and that can massively impact your project budget.
To put it simply, you can avoid paying those extra fees by treating your rental equipment with the utmost care. Make sure you use it only for its intended purpose; if it's a longer rental, keep it well-maintained like you would any of your other equipment.
9. Choose High-Quality Equipment
Opting for older equipment from less reputable brands might seem like a cost-saving move, but it's likely to negatively impact your productivity. It can also have serious consequences for your reputation if you don't have the right tools to do the job.
For example, if your rental suddenly breaks down, you might need to halt work until you can service it. This can potentially push your project back and prevent you from meeting your deadline. Before you begin using any rental equipment, be sure to carefully inspect it for:
- Leaks and drips
- General appearance flaws
- Cracked or deflated tires
- Damaged rims
- Cab issues
The easiest way to ensure you get the best quality equipment is to rent from a reliable dealer like The Cat Rental Store. We carefully maintain all our rental equipment to the highest standard so you can rest easy knowing you've got the best in the industry behind you.
10. Take Advantage of Insurance
Most rental providers offer insurance for an additional fee. While it may seem like just another extra cost, it's a smart idea to take your dealer up on this offer.
Here's why. Surprises during construction are almost inevitable — no project goes completely according to plan. While you may not think you'll end up needing it, purchasing insurance for your rental equipment can save you thousands in the event of an accident.
Prepare your company for unexpected circumstances. Your budget will thank you.
Rent the Equipment You Need From The Cat® Rental Store
Choosing the right construction rental provider goes a long way in making sure your equipment costs stay within your budget. That's where The Cat Rental Store can help.
Our dealers have extensive knowledge and decades of expertise in our equipment; you can count on them to help match you with the best machine for each job. Plus, with more than 800 locations in North America, we can help you access high-quality rental equipment wherever your jobsite may be.
If you want to get the most out of your rental, The Cat Rental Store is your best option. Find your nearest location to start.
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