Increasing Average Age of Equipment Rental or Hire – Impact

The reasons why are:

Vendor Financing

Vendor financing has been significantly curtailed.

The Car rental industry is one obvious case in point, where the average age of even the major rental fleets is increasing.

The key reason is the lack of capital.  Previously the major Car Rental companies relied on financing from the major automotive manufacturers.  Such financing had been cutback substantially, for all the reasons discussed in the News and in Congress.

Bank Financing

The other form of new equipment financing has been by bank loans in various forms.  The general tightening of credit from the Banks and other major institutions has meant that it has been harder to finance the acquisition of new stock.  Despite being bailed out by the tax-payers around the world, the banks were reluctant to continue providing credit to Small business to fund new equipment purchases.  The reason cited by some banks was that Small Business was  a credit risk.  (Side note:  Interesting assessment by the Banks, from what I remember they were the one’s that created the GFC, they were the one’s tax-payers had to bail out – so who is the risk? )

With lines of credit curtailed many small businesses were unable to fund new rental and hire equipment purchases.  Instead electing to extend the life of the equipment.

Funding From Asset Disposal

During the harshest periods of the downturn, older stock items attracted lower sales attention and hence realized sales value.  Such lower values on sale for older items, meant less cash to purchase to acquire new equipment.

Furthermore, these lower sales value a further flow on effect.  When the actual value received at sale is lower than the book value then the difference has to be written off.  When large volumes of items or a major capital equipment are disposed of through sale the impact on the rental or hire companies balance sheet can be significant.  This balance sheet impact further reduces the companies ability to borrow capital or maintain a certain line of credit from the banks.

Cash Flow

The other major financing option was through cash flow.  That is cash flow used to fund (pay) for new equipment when it was on a payment plan of some description.

Secondly, the loss of the first two meant that hire and rental businesses became and still remain primarily focused on cash flow management.

Even with the Green Shoots of recovery around the World, including an Indian summer for the hire industry in the UK at present, many hire and rental companies continue to manage cash flow, primarily through cost containment.

Impacts

Therefore with an aging rental or hire equipment pool must creates a higher demand for repair, servicing and inspection.  The frequency rate or intensity of inspection/ servicing invariably increases with age.  But here are some tools that may help:

You Tube: That may surprise you, but You Tube can be an extremely effective in reducing equipment damage by providing a visual of how to assemble, dis-assemble or maintain an equipment.  To read more on this read the article on How Rental and Hire Companies can use You Tube You Tube management is fully integrated in to HireEzy, making this an extremely simple process.

HireEzy 2.1: Includes product management functions such as equipment service scheduling, maintenance and history.

Rental and Hire’s Business Future

The one for certain is that this situation wont last forever.  The hire and rental industry is dynamic and progressive.  It will no doubt commence updating equipment as soon as practical.

More importantly the Hire and Rental industry is fundamental the recovery, as explained in the article Global Innovation Depends on

About Us

HireEzy is the complete business management solution for hire and rental companies. Not only does it include digital marketing, web integration it also includes social media marketing tool integration. For more information email us sales@makinglifeezy.com.au

in Finance, hire accounting, Line of credit, Small Business