Rent or Own: There Is an Option Out There for Everyone

Distributors offer a wide array of rental options — learn the ins and outs before committing

Renting is often a win-win situation for contractors and distributors. While a contractor may pay a little bit more over the long run, the ability to space out payments on a truck over time can be well worth it.

But there are considerations to make before jumping on the rental bandwagon.

A recent-year model piece of equipment with customization can easily run upward of a half-million dollars. Fortunately, with the increasing demand and focus on alternative excavation methods, options for renting and purchase have grown significantly.

“We work outside the box — it’s not all black and white,” says Smiley Rich, executive vice president of the rental division for Custom Truck One Source. “We lay rental agreements out to how the customer would like to do it.”

While Custom Truck One Source does sell trucks, they are willing to rent out any piece of equipment in their $300 million inventory. The company has nearly 4,000 Tornado Global Hydrovacs vac units in rotation, along with a plethora of support equipment and Cusco DOT-code sewer jetters.

ALL ABOUT THE DOLLARS

The main consideration for any contractor between rental and purchase is obviously cash flow, but Rich makes clear that it’s not a this-or-that decision.

“If a company doesn’t have the capital expenditure money to spend right now, but they need units because they landed a big job, we’ll put the unit on a rental purchase option,” Rich says. “At the end of that period, we apply a percentage of their rental expenditures toward the purchase, so they didn’t just throw away that rental money.”

Custom Truck One Source, like most distributors, will work with customers on a variety of rental periods.

“It depends on the company as to how they structure, whether they want to rent or lease, or just purchase outright,” Rich says. “They can customize the agreement as much as they want; they can structure it pretty much any way they want; they can do rent to rent or rent to purchase.”

CONSIDER MAINTENANCE

One of the biggest differences between renting, rental purchase and straight purchase is maintenance. Most distributors will remain in charge of maintenance during a rental agreement, but not so for rental purchase or straight purchase.

That might seem like a clear-cut benefit: Why take on the responsibility of maintenance if you don’t have to? But there again, it’s a matter of preference. There are inherent speed bumps when you’re not in charge of maintaining your own equipment. It may limit your ability to control when and how maintenance is done or even whom it is done by.

On the other hand, it can be a serious benefit for small operations that might not have their own mechanics or infrastructure to make repairs anyway.

“One of the chief concerns about having your own vacuum truck is if you’ll be able to properly maintain it,” says an article on Haaker Equipment’s website. Haaker Equipment also offers a wide range of rental options in addition to selling. “Owning the truck also means being saddled with the responsibility to repair anything that breaks and looking for a temporary replacement truck when necessary. This can prove to be a highly tedious task, especially if you do not have the staff to deal with it.”

GET WHAT YOU NEED

Another consideration is customization. For many vacuum excavation contractors, customization is the key to a profitable rig. Renting a unit limits your options. But if you make a commitment upfront to purchase the unit, most distributors will work with you and build to spec.

Be wary, though — these are binding legal commitments that have serious financial consequences when shirked.

“If it’s a signed RPO (rental purchase option) agreement and there’s a minimum term, there is no getting out of it,” Rich says. “In many cases, there are minimum terms. Here’s how that works: Let’s say you come in and sign an RPO agreement clearly stating that you’re responsible for repairs and maintenance. So we say, ‘You have to give us a 12-month guarantee,’ which means if you don’t buy the truck, you have to keep it for 12 months.

“You can buy at any point: If you decide after the second month that you want to buy it, you can buy it — there’s no penalty. If you don’t buy it, then you still have to keep it 12 months. It keeps people from saying, ‘Hey Smiley, I want this vac unit in the rental fleet,’ so I drop in a half-a-million-dollar unit, and then they return it after two weeks. That’s not a good business plan.”

A MATTER OF PREFERENCE

In the end, whether to rent or buy often comes down to personal preference.

“Some people just want to rent, and in some cases, they rent it until it’s totally paid out and off they go,” Rich says. “Small companies starting out typically just want to rent. They have a job that may last three or four months, so they rent. At the end of the four months, if the job is over and they don’t have a next job for it, they return the unit. If they have a next job, they may decide at that point they want to put it on RPO. If they want to put it on RPO after they’ve had it three months, that’s fine.”

Rich says typical rental agreements run anywhere from three to 36 months, but they will even go out to 40 months or more in some cases. The last consideration to make is how flexible your distributor will be. See what changes they will allow down the road, and always make sure you know exactly what you’re getting into before signing on the dotted line.

“It’s simply a choice by the customer as to how they want to do things,” Rich says. “Some people don’t want to own things; some people don’t want to pay rent. But it’s always an option. We just try to structure the agreement based around the customer’s needs.”



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