US rental penetration increases

New data from the American Rental Association (ARA) has revealed that construction and industrial rental penetration – the proportion of the total fleet of construction machines that are owned by equipment rental companies – reached 53.9% last year.

This compared to penetration of 52.9% in 2013, according to the ARA Rental Penetration Index.

John McClelland, ARA vice president for government affairs and chief economist, said, “Rental penetration continues to increase in conjunction with strong growth in rental revenues in 2014.”

Indeed, the 2014 increase marked the fifth year of growth since the dramatic dip in the index between 2008 and 2009. That dip was attributed to the quick action equipment rental companies took when the financial crisis significantly reduced construction activities that drive equipment demand.

Since 2009 rental penetration has continued to increase largely due to the growing demand for equipment in the construction and industrial segment, according to the ARA.

Tight credit conditions and the increasing costs of buying new Tier IV equipment, making it difficult for contractors to rebuild their fleets after the financial crisis, have also fuelled growth.

“One of the biggest questions going forward is if the secular shift away from equipment ownership by end users toward rental continues,” Mr McClelland said.

“If 2014 is any gauge, there is still room for rental penetration to continue to increase and as the economy continues to grow this means more demand for rental equipment; a double-barrelled boost to the equipment rental industry.”

ARA and its research partner IHS Economics developed the ARA Rental Penetration Index to provide another measure of rental industry performance.

The Index uses information from the US Department of Commerce Current Industry Reports along with an aggregate estimate of the Financial Utilisation metric provided by Rouse Analytics.

The Index is value-based and uses original equipment cost as the primary weighting factor to calculate the ratio of rental equipment value to total fleet value.