StrongBox Leasing

THE RAISING OF LEASING EQUIPMENT INDUSTRY

Industrial Equipment (IE) rental and leasing business’ popularity has increased due to a variety of reasons. A few key contributors to the growth of IE rentals & leasing include the rising cost of purchasing equipment, increasing economic uncertainty, lack of capital, technology up-gradation, unpredictable construction and infrastructure growth, depreciation woes, costly breakdowns and limited space availability which has forced construction companies to find ways to save money wherever they can. In many instances, renting has become a viable option for many companies and has provided them the ability to cut costs and run a more financially stable construction business.

Today, many IE users are preferring to rent IE or ‘lease-as-use’ model as an optimal way to do business. This has proved beneficial for the IE market because with more financing of CE and the increased use of rentals/leasing, their demand has only increased. At present, the Earthmoving and Construction Equipment (ICE) rental market is only 7-8 % of the total ICE market in the country, but the percentage is set to increase and the IE industry is expected to grow at the rate of 30% per-year in the future, particularly, the rental & leasing market is expected to pick up in emerging economies.

Companies in this industry rent and lease equipment to commercial and industrial entities for use in business operations. Major companies include US-based AMECO (owned by Fluor), Herc Rentals (formerly Hertz Equipment Rental), and United Rentals; UK-based Aggreko, Ashtead Group (owner of US-based Sunbelt Rentals), and Speedy Hire; and Japan-based Tokyo Century Leasing and Mitsubishi UFJ[6].

Demand is driven by business and industrial activity, particularly in non-residential construction. The profitability of individual companies depends on the merchandising mix and cost of financing rental inventory. Large companies have economies of scale in buying equipment and having multiple outlets to share equipment. Small companies can compete effectively by providing specialty products for a local market and by offering superior customer service. For example, the US industry is concentrated: the top 50 companies account for about 55% of revenue[7].

[1] www.bloomberg.com

[2] www.constructconnect.com

[3] www.constructconnect.com

[4] www.bloomberg.com

[5] www.conexpoconagg.com

[6] www.bloomberg.com

[7] money.cnn.com