Equipment Type

Construction Equipment Rental Forecasts Way Off

Economic recession weighed heavily on the minds of construction equipment rental dealers as 2008 wound down, with nearly half of them citing the economic situation as the key concern for 2009.

January 01, 2009

 

 
Heavy equipment rental forecast

Rental dealers expect to turn back from an “off” 2008 to “average” in 2009. Southern Plains dealers are especially bullish; Pacific and South Atlantic are not.


 Construction equipment rental business

Business quickly turned for rental dealers, who projected a “very good” 2008. Instead, they came in three levels lower at “off.” Expectations of a bounceback are slim, with only an “average” year forecast.

Economic recession weighed heavily on the minds of rental dealers as 2008 wound down, with nearly half of them citing the economic situation as the key concern for 2009. Remember, this was before the government bailout, too. As equipment rental operations waited for 2008 to end, the outlook for 2009 was flat.

Heavy equipment rental dealers responding to our survey were all members of the American Rental Association, who once again assisted Construction Equipment in gathering comprehensive data for this segment of the equipment market. Due to the events of late autumn, the 2008 business year rating was not even close to the forecast dealers had held: “very good.” Instead, dealers rated 2008 as “off” and anticipate 2009 to be “average.”

Sales volume fell for 39 percent of dealers last year. With 19 percent citing increases, the net was -20 percent, a substantial fall off from 2007’s net of 25 percent. This year, dealer forecasts net out at 14 percent, but seven of 10 respondents expect sales volume to be the same this year as it was in 2008.
 

 
 


Sales volume in 2008 took its greatest hits, dealers say, in new-equipment sales. Nearly 40 percent reported sig-nificant decreases here. Other areas of the business that suffered were rent-to-buy contracts (27 percent reported decreases), short-term rentals (24 percent), and leasing (23 percent). Service volume increased significantly for 28 percent of dealers.

Not surprisingly, short-term rental margins suffered as volume decreased. Twice as many dealers reported lower margins as reported higher, and 8 percent actually reported much lower margins than in 2007. Over the previous four years, one-third of dealers had reported higher margins.

Rates, on the other hand, rose for 26 percent of dealers and decreased for 22 percent, for a net of 4. That net will grow to 32 percent if forecasts bear out: 42 percent of dealers say they will increase their 2009 rates with ony10 percent saying rates will decrease. 

As will other vocations in this report, 2009 was somewhat of a mystery. Not missed, however, was the dark cloud of recession. Some 93 percent of dealers say recession is of major concern, and 48 percent say it is the single most pressing concern. Declining construction markets and inflation were the next serious concerns, cited by 60 percent and 53 percent of rental dealers, respectively.

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