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Capitalizing on Construction Equipment Rental Fleets - 6 views

axis capital group singapore jakarta malaysia beijing Capitalizing on Construction Equipment Rental Fleets

started by willh00p3r on 14 Aug 14
  • willh00p3r
    #1 willh00p3r on 14 Aug 14
     

     


    While the attitude for big infrastructure projects is indefinite, there is a robust bright spot in the construction industry's yet to come. Equipment rental businesses are predicting fast-growing achievement by presenting contractors the newest machines without the large payments. Not merely has the rate of equipment rentals developed in each of the past three years; however the amount of rental dealers has increased, too. This is also being felt by Axis Capital Group, Singapore (company is servicing many Southeast Asian countries such as KL Malaysia, Beijing China, Jakarta Indonesia and many more).



    That's due to construction companies are ruling it more cost-effective to rent vs buying costly equipment that will just be used for a little period of time. According to a rental industry study by Andy Agoos for Neff Rental, in the U.S. today, about 40 percent of construction equipment is rented - and that's expected to increase.



    There are numerous influences that go into the rent rather than buy verdict for contractors and construction companies. These consist of the length of the job, the trouble of transporting a piece of equipment to jobsites, and the possibility of gaining additional projects where that specific piece of equipment will be used. All of these factors combine to make renting more attractive than buying, for some companies.



    Dealers may obtain their rental equipment in many means - normally new from manufacturers or used from auction. When they agree it's no more cost-effective to hold onto renting out a specific piece of equipment, they can trade it to an end-user or put it up for auction again. Warning, there are many risks in buying from an auction.



    Costs for well-maintained quality equipment with low usage rates are increasing. According to some reports, in August 2013 (the most recent date for which figures are available), rental rates increased 0.8% from the prior month, on average, for the rental companies that participate in the Rouse Analytics Rental Metrics Benchmark Services. Rates were up 4.0% from August 2012.



    In reality, the construction equipment rental business in the U.S. is anticipated to grow 12% in 2014 to approximately $37 billion in total revenues, according to Frank Manfredi, president of Manfredi & Associates, Inc., a market research and consulting firm that specializes in the industrial sector of the rental industry.



    Manfredi estimates that about half of U.S. dealers offer rentals in addition to sales. As the market for equipment rentals continues to develop, nearly all dealers fall into one of these buckets: A retail store that rents, or a rental store that sells.


     


     


     


     

  • treasking
    #2 treasking on 20 Aug 14
     
    Capitalizing essentially means any asset that you can depreciate. Essentially, instead of expensing the full amount on purchase you instead depreciate the asset over its useful life. Basically matching the expense to the period it is incurred, not all at once.
  • honeyaxis
    #3 honeyaxis on 22 Aug 14
     
    Should I capitalize or expense equipment with a useful life of more than one year, but which doesn't cost a whole lot e.g. less than $500?
  • joannamorton
    #4 joannamorton on 22 Aug 14
     
    If your company leases a forklift truck, is the lease a rental agreement, or is the lease really a disguised purchase and financing arrangement? If it is the latter, then the forklift truck and the lease should be capitalized.
  • amandaoliveira
    #5 amandaoliveira on 22 Aug 14
     
    It means you treat them as a capital expense and write them off over a longer period, as against putting them through on the current year p & land adversely affecting profit figures.

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