Succeeding in Rental

Many reports this year have shown that the rental market is faring well, better than it has in recent years. Some business management system providers are even adding software features to help users better manage rental fleets.

However, dealers seem to still be divided about whether or not offering rental equipment is a viable option for their business. If they do choose to take on rental, the right products and proper management goes a long way.

Trends in the market

According to an American Rental Association (ARA) survey of members, “More than 80% of rental store owners and managers expect 2011 to be a much better year than 2010.” More than 34% of ARA general members responding to the survey expect rental revenues to show double-digit increases in 2011 vs. 2010, while another 46% expect at least single-digit increases this year.

Yet with a promising forecast and the industry taking notice, many dealers are still cautious about taking on rental as part of their business offering.

“We are one of the nation’s largest power equipment dealers and it’s really hard to do multiple things well,” says Sean O’Connor of O’Connor’s Lawn & Garden in Oklahoma City. “I’m afraid renting equipment will slow down what we do best, and that is selling new power equipment at prices that can’t be touched.”

O’Connor maintains low prices on equipment thanks to low overhead. That’s something he fears he might not be able to keep up with the added responsibility of rental.

However, offering rental equipment can bring more traffic to the showroom floor. Customers who come in to rent a product, like a tiller for weekend use, could end up leaving with a product like a mower that would see regular use.

Products to offer

Dealership showrooms are often already stocked with the same products suitable for a rental fleet. Working with brands you are comfortable with, and the service department is knowledgeable on, is a good approach to taking on rental.

“I think it is natural for outdoor power dealers to rent most of the same equipment that they sell,” says Jim Meyer of United Hardware. “This is something that heavy equipment dealers have always done. They can then use the rentals as a vehicle to sell the equipment and also offer rent-to-purchase options, adding to profits on those sales.”

Proven Power in Oconomowoc, WI, has been renting out equipment for at least 10 years. The largest part of their rental revenue comes from commercial users trying to save on the cost of buying and maintaining equipment.

“Items like stump grinders, sod cutters and small tractors are very popular items that we can count on from our regulars for recurring rentals,” says Lonny Andersen, parts manager at Proven Power. “We only carry about 100 units total, but would add more if we had the space.”

Proper management leads to success

Like any area of a dealership, proper management of the rental side can lead to profitable opportunities. Anne Salemo, president of Charter Software Inc., warns that dealers put themselves at risk if they don’t manage their rental fleet properly.

“Carrying costs of floored rental fleet, lack of utilization and breakdown costs due to poor tracking can seriously impact the profitability of the rental department,” explains Salemo. “Interest accruing on units that are not renting creates unnecessary overhead. Keeping up on routine maintenance of the units will reduce breakdown costs while out on rent. With careful management, the dealership can have the right equipment at the right time at the right price.”

The Charter Aspen Rental Component (see page 26) offers dealers many tools for managing the rental side of their business. With it they can track equipment depreciation and service dates, monitor rental trends, track availability, as well as schedule and record repairs and maintenance.

Using an integrated system for management of equipment sales, repairs and rental puts all customer information in one place for easy access and maybe even more sales.

“Maintaining separate rental and accounting systems creates more work and duplication of effort for the dealer and can result in inaccurate record keeping,” says Salemo. “Because Aspen’s Rental Component is part of a fully integrated business management system, information related to the rental unit is easily accessible. Knowing all facets of a customer’s business with the dealership empowers all of the departments to work together to meet the customer’s needs.”