There is a lot less equipment purchasing going on in 2002 than there was a few years ago and it doesn't take a genius to understand the reasons. With the economy still questionable and the supply of equipment exceeding demand, it makes sense for most rental companies to be cautious in their expenditures. demand, it makes sense for most rental companies to be cautious in their expenditures.
That being said, if you are looking to buy, this is probably the best time to do so. Manufacturers are very eager to sell and will be willing to offer good discounts and very favorable terms.
Rental companies are in the drivers' seat at the moment when it comes to buying or leasing equipment. As our cover story explains, manufacturers are offering favorable terms and a wide variety of options and many suppliers are willing to customize packages to work for the needs of particular rental companies. Rental company executives are now far more knowledgeable and sophisticated than in the past when it comes to navigating the waters of finance, knowing what kinds of capital are available to them and what would be most effective for their particular financial situations. Zero interest and no money down always sounds great when you're buying a couch, but may not be the best move for the long-term financial health of a multi-million dollar company that has to think about cash flow, depreciation, taxation, EBITDA and more.
And manufacturers are more willing than in the past to accept equipment trade-ins or walk-away leases simply because they know if they don't, their competitor will.
That's the way it is in 2002 when it comes to rental companies buying equipment just as when it comes to rental companies offering their services to their customers. Rental companies are making deals they might not have considered a year ago and might not be willing to consider a year from now, but they know that if they don't, their competitor will and there are too many choices out there. So many owners of rental companies I've talked to have told me the same thing — they are accepting rates they never would have dreamed of in the past to hold on to customers they never thought they'd ever face losing. They are hoping it won't be the same way a year from now, but in the meantime, the struggle for survival is the issue now whereas the method of expansion may have been the debate a few years ago.
We all have to keep in mind that the economy is cyclical and a year from now the current crises might be as distant a memory as the heady years of the mid-'90s might seem to many of us now.
You alone know whether you can buy more equipment now or risk becoming too leveraged. If you decide you can afford to, think seriously about what brands you want, from the quality of the equipment itself, the product support from the manufacturer and from the financing perspective. It's a great time to buy if you buy wisely.
