A Name Worth Repeating 62 Years of Success, Growth and Expansion in the Heavy Equipment Rental Industry
14 MONERIC EQUIPMENT RENTAL
20 KCS RENTALS, INC.
24 RENT, LEASE or BUY
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Rental Equipment Issue
CONTENTS Feature Articles 06
ECCO EQUIPMENT CORPORATION – A NAME WORTH REPEATING
62 Years of Success, Growth and Expansion in the Heavy Equipment Rental Industry
14
MONERIC EQUIPMENT RENTAL, INC.
20
KCS RENTALS INC.
06
Making a Big Impression on the Bay Area and Sacramento Regions with Hard to Find, High Quality, Late Model, Well Maintained, Tier 4 Rental Equipment
Rent Your Next Piece of Equipment from the Industry Professionals at – KCS Rentals Inc. – They Have Been Where You Are and Know Your Business
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VOLVO CE
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COMMERCIAL CREDIT GROUP INC.
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Rent, Lease or Buy – What’s the Best Option for Construction Equipment?
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There’s More to Equipment Financing Than Rates
CalContractor Magazine / www.calcontractor.com PUBLISHER: Kerry Hoover khoover@calcontractor.com
CONTRIBUTING EDITORS: Brian Hoover, CMS, LLC Agako Nouch & Ryan Sherwood, Volvo CE Julie Murphy, Commercial Credit Group
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CalContractor is published twelve times each year by Construction Marketing Services, LLC. Copyright © 2020. All rights reserved. Reproduction in whole or in part without permission is prohibited. P.O. Box 892977, Temecula, CA 92589 / Phone: 909-772-3121
Your needs change. That’s why you rent. Bakersfield Bakersfield, CA 661.387.6090
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We are committed to your success. So when productivity, efficiency, and flexibility are critical to the job, look no farther than our full line of rental options. Rent for the day, for the month, or for the job. Volvo machinery is built for power, performance, and durability — and engineered to fit tight budgets.
A NAME WORTH REPEATING 62 Y E A RS OF SUCCESS, GROW T H A ND E X PA NSION IN T H E H E AV Y EQUIP M E N T R E N TA L INDUS T RY By Brian Hoover, Editor
A
n echo is a sound that goes forth, bouncing and repeating itself over and over again. Although it may be spelled differently, ECCO Equipment has long been echoing their core mission of being the industry leader in the heavy equipment rental business. ECCO has worked 6 decades to establish itself as the premier provider of high-quality, late-model earthmoving equipment that continually exceeds the expectations of its loyal customers. Their growth and success over that time are a byproduct and testament to the company’s leadership and dedicated employees. Integrity, efficiency, skill, service, value, and innovation are just a few of the attributes that have served this company so well since the company was founded by Don Schmid and Les Haug in 1958.
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THE BEGINNING After returning home from serving in the Navy in 1954, Don Schmid went to work for the Los Angeles County Sanitation District as a civil engineer. Don’s immediate supervisor was Les Haug, who began working for the county of Los Angeles after serving in the Army Corps of Engineers in World War II. The two men worked together as a team and accomplished much during their time with the County. In 1958, Schmid wanted to go out on his own and he convinced Haug to be his silent partner in a general engineering construction business venture. With an initial investment of $5,000, the two men formed ECCO which stood for Engineered Construction Co.
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David Schmid, President, ECCO Equipment.
The newly formed company specialized in reservoir, flood control and bridge projects. They enjoyed solid growth and success in Orange and Los Angeles counties, but there were still many challenges along the way, including periods of inactivity that left operators and equipment idle. One of the operators was Harry Proctor and in 1962 he asked permission to rent himself and his crane to another construction firm. It turns out Harry was just as good renting equipment as he was operating. Soon, the crane was being rented regularly to the point where it was not available to ECCO when they needed it. Solution: Buy another crane. This process repeated itself to the point where ECCO had established a sizable fleet and Harry’s full-time job was keeping it rented.
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In reality, ECCO had two businesses: contracting and rental. CHANGING TIMES So in 1972, Don and Les decided to divide the company into Ecco Contractors, Inc., and ECCO Equipment Corporation. Soon after, Ecco Contractors, Inc. was sold to Browning-Ferris Industries and rebranded as BFI Constructors. Schmid stayed on with BFI and ran operations until 2001, while Harry Proctor was named
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7
Left: Southern California Dispatcher, Nick Hernandez. Right: Dave Novak, Corporate Fleet Manager.
general manager of ECCO, and Haug remained on as a partner. ECCO’s bread and butter in the 70s and 80s was primarily in the mass grading housing market. They maintained more than 40 operators during these years who traveled from job to job, grading sites with their John Deere 450 dozers, among other machines like Gradalls and Cat 225 or 235 excavators. The focus was on operated and maintained rentals, but things were about to change. In the mid-80s, ECCO began its initial expansion into the Central Valley, opening up its first satellite location in Visalia. From there, they gradually continued their growth onto Stockton, Riverside, Las Vegas, Phoenix, Salt Lake City, Sacramento, Bull Head City and over to Phoenix, Boise, and even Alberta, Canada where the oil field business was booming. Their modus operandi was to move into the burgeoning markets while always maintaining their
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discipline and foresight to exit when opportunities or economic conditions began to fade. PASSING THE TORCH In 2006, after 48 years of leadership, Don Schmid stepped down as President and was succeeded by his son, David, who joined the company in 1993, and was now tasked with continuing the legacy of his dad and Les Haug. Within the next 18 months, however, the company was reeling from the triple tragedies of Les’ passing, then Don’s passing, then the start of the Great Recession. Being heavily reliant on residential construction, ECCO suffered a 60% reduction in revenue in a matter of two years. Many of its customers went bankrupt. Very few needed equipment. The “shovel ready” projects that the { Continued on page 10 }
C A LCO N T R AC TO R .CO M
ECCO EQUIPMENT Heavy Equipment Rentals & Sales
800.490.3226 QUALIT Y EQUIPMENT FOR RENT
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CALIFORNIA • ARIZONA • NEVADA • IDAHO • UTAH • NORTH DAKOTA 1417 N. Susan Street Santa Ana, CA 92703 (714) 554-4851 *Riverside, Coachella, San Diego
1047 N. Kelsey Street Visalia, CA 93291 (559) 651-0116 *Sacramento, Stockton
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4053 Las Vegas Blvd. Las Vegas, NV 89115 (702) 877-4302 *Bullhead City
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{ Continued from page 8 }
federal government fast tracked didn’t actually need any big shovels. “It was a tough time,” David recalled. “If it weren’t for our loyal employees and the solid foundation my dad and Les had set, we might not have made it. We stuck to our core competencies and our values. Our customers recognized they could rely on us and when they needed equipment again, they called. It was a slow process, but now we are more profitable than ever.” ECCO is now in seven states with 12 physical service locations and several additional holding yards. With a current inventory of more than 600 pieces of construction machinery, ECCO has the largest dedicated rental fleet of heavy earthmoving equipment in the country. VISION, PHILOSOPHY AND COMMITMENT Below: Technicians, Brad Clayton and Miles Prusha completing check valve repair.
“Our value proposition is simple,” David continues. “ECCO will save a customer money by shouldering the ownership, maintenance, logistical, and regulatory costs of their fleet. The uptime will be greater. The selection will be wider. The technology will be
newer. It’s all we do, so we can do it faster and cheaper.” Dave Novak has been working for ECCO for nearly 20 years and currently serves as the company’s fleet manager, safety officer, and Southern California regional manager. He concurs: “We have been at this a long time, and we know that our customers have lots of options when it comes to rental equipment. We also know that everyone is happy and dancing around the bonfire when things are going well. What matters is the way a rental equipment company responds when things aren’t so great,” says Novak. “This is what separates ECCO from the pack as far as I am concerned. Next to safety, we have no greater priority than keeping the equipment running and our customer on schedule. These machines work in extremely harsh environments and we have the capability and drive to immediately fix whatever might go wrong. Our employees do an excellent job of handling every situation with integrity, respect, expertise, and the desire to solve problems.” In addition to the unmatched inventory of machine types, sizes, and attachments, ECCO’s fleet complies with all CARB requirements. Novak elaborates “Not only that, we have over 150 pieces of Tier 4 equipment to meet whatever emissions standards a job might require. I’m talking D8T’s, D10T’s, 45-ton artic trucks, 150ton excavators, zero swing excavators, 623K’s, 815F’s, motorgraders, and loaders of all sizes. We have units equipped with telematics to assist customers maximize usage and prevent problems from arising. Units are also available with Trimble and Topcon grade control systems. We are committed to providing the very best and are continually upgrading our fleet to meet all aspects of our customer’s needs.”
Above: Technician, Ryan Weed, replacing grease line on a Cat 740B articulated dump truck.
THE FUTURE Having reached a plateau of sorts under the original ownership, last year ECCO sought new partners to help it expand further. At the same time, Acme Lift was looking to acquire a company to complement its wholesale aerial lift rental business. As a result of the partnership, ECCO is even better positioned to provide for its customers with more fleet in more locations. “I am very excited about this new chapter in ECCO’s long history,” Schmid remarked. “Acme is a first-class organization that shares our values. We will help each other get better by sharing resources and expertise.
CALCON TRAC TOR .CO M
Our customers will be the primary beneficiaries.” ECCO Equipment is a full-service rental company offering late model, well maintained, heavy equipment for the construction and mining industries. For more information on ECCO Equipment or to view their list of heavy equipment rentals or used equipment for sale, please visit www.eccoequipment.com or call their Santa Ana headquarters at (714) 554-4851. Cc
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Join the BID to WIN! PUBLIC NOTICE: ACCESS TO CALTRANS UPCOMING CONSTRUCTION AND ARCHITECTURAL & ENGINEERING PROJECTS California Senate Bill 1 (SB1) will provide $54 billion over the next 10 years for state and local transportation projects. This creates additional opportunities for all small businesses, including businesses owned by women, minorities, disabled veterans, LGBT, and other disadvantaged groups, to participate on public works projects with local and state transportation agencies. Now is the time to get involved. Visit Caltrans’ SB1 web site, www.rebuildingca.ca.gov, and learn more about planned improvements. Review Caltrans’ online “look ahead” reports of upcoming construction and architectural and engineering contracts to identify potential opportunities for your business. Attend contract-specific outreach events, that include pre-bid meetings and pre-proposal conferences, and meet with prospective bidders/proposers. Learn about Caltrans contracting requirements at a free training or workshop. Caltrans needs your help to repair and rebuild California’s transportation system. We are looking for qualified contractors, consultants, suppliers, truckers, and service providers to help fix our roads, freeways, and bridges. Construction look-ahead report: http://www.dot.ca.gov/hq/esc/oe/contractor_info/12_month_Advertising_Schedule.pdf Architectural and Engineering look-ahead report: http://www.dot.ca.gov/dpac/ae/doc/lookahead.pdf Caltrans Events Calendar: http://www.dot.ca.gov/obeo/calendar.html For more information, contact Caltrans’ Small Business Advocate at smallbusinessadvocate@dot.ca.gov.
Bare and Operated Heavy Equipment for the Southern California Construction Industry
EQUIPMENT AVAILABLE • Track excavators
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ONERIC Equipment Rental By Brian Hoover, Senior Editor
Making a Big Impression on the Bay Area and Sacramento Regions with Hard to Find, High Quality, Late Model, Well Maintained, Tier 4 Rental Equipment
T
he reasons for creating a new business enterprise are as varied as the people who start the business in the first place. There is, however, usually a few common factors, such as necessity and convenience. Monica (McCosker) Johnson and Eric McCosker have been in and around the civil general engineering construction industry their entire lives. This brother and sister team grew up in a family with substantial ties to heavy construction, particularly in the mass grading and excavation niches. They became familiar with the equipment and the dayto-day operations of a heavy civil construction firm early on and continued their interest and development in the ensuing years. Monica went on to graduate with a degree in biology from the University of San Diego, while Eric received his degree in Construction 14
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Management from Colorado Mesa University. Monica joined the family business around eight years ago, with Eric getting involved after graduating college in 2015. Monica and Eric come from a successful, entrepreneurial family with a strong work ethic. They had this idea of starting a rental equipment business as an opportunity to work together and see what they could create on their own. The siblings soon began to realize that there was a specific niche in the heavy equipment rental industry that was being a bit overlooked. This was when they decided to start Moneric Equipment Rental, Inc. (Moneric) in 2015 to serve the entire Bay Area, Sacramento and Central Valley regions. “We noticed that many of the rental companies were offering the usual smaller equipment, and others had the big heavy equipment
you see on the large grading and excavating projects. What seemed to be missing was the late model midsized equipment that is typically used in more of a specialty situation, and that is what we decided to focus on for our new company,” says Eric. “While we still offer many of the machines that are utilized every day out on the job site, we also have equipment like our Cat 627 scrapers that are used on smaller grading jobs that may be more confined and have less access.” When you call Moneric and speak directly to Monica Johnson, you will find out that they offer low hour, current model machines that are all Tier 4 and prepped and ready to go right to work on your job site. Their fleet consists of everything from backhoes and skip loaders to medium-sized dozers like the Cat D8, all the way up to scrapers, excavators, C A LCO N T R AC TO R .CO M
articulated dump trucks, water trucks, wheel loaders, rubber-tired dozers, scrapers and more. “Our fleet consists of all late model Cat machines, and our customers know that they are getting a low hour quality unit when they call for our services,” says Eric. “Our converted Cat, Tier 4, 8,000-gallon articulating water trucks, for instance, are very popular and seem to always be busy on mass grading projects. Moneric is primarily a bare equipment rental company, with relationships and strategic partnerships Right & Bottom: Moneric Equipment Rental utilizing dozers, scrapers and compaction equipment on Treasure Island in San Francisco Bay.
with other local and regional bare and operated equipment rental companies. “If one of our customers calls and needs a D10, 657 scraper or even a Cat 390, 198,000 lb. excavator, we can deliver with or without an operator,” says Eric. “We have long standing relationships with other rental equipment fleets with access to up to 400 pieces of construction machinery.” Moneric also owns and offers the smaller to medium-sized machines like Cat D8 dozers, the Cat 308 CR mini excavator on up to the Cat 336 81,900 lb. machine
and wheel loaders in the Cat 950 range. “We started with just a few pieces of equipment and grew from there with longevity and sustainability at the forefront of our business plan. We are a small business enterprise with my sister, Monica, serving as the president and myself as the vice president. We are also looking into the advantages of being a womanowned business enterprise (WBE),” continues Eric. “We are always looking for an edge or competitive advantage while continuing to assist our clients in meeting their minority requirements.”
Eric McCosker says that today’s heavy equipment users are looking for a company that knows their industry intimately. “Our clients want to work with someone small enough to know them by the sound of their voice when they call, and big enough to meet all of their heavy equipment needs. That is precisely who we are and what we represent,” continues Eric. “We are hungry and eager to show our customers why they should keep coming back to Moneric for their heavy construction equipment needs.”
Above & Below: Moneric Equipment Rental Water Pig hard at work at a mass grading project for Mission Village in Concord.
Moneric Equipment Rental’s clients are primarily medium and large-sized civil general engineering contractors. “We have worked with big names like Teichert, Desilva Gates, Bay Cities, Independent Construction and other major earthmoving companies,” says Eric. “They seem to appreciate our late model, clean-burning Tier 4 machines that help them meet agency requirements. We have what they need to be compliant on any project..” Zach Neu is a senior estimator for Independent Construction out of Concord, and he has been renting machines from Moneric since their inception in 2015. “When we are awarded a job, we will start calling around to staff the project from an equipment standpoint. We go with Moneric because they have the newest machines at a great rate, backed by excellent customer service,” says Neu. “At Independent, we are known for our large, mass grading projects, but we also do a lot of smaller subdivision jobs as well. Moneric’s Cat 627 scrapers are ideal for our 50 to 80 lot subdivision projects or high density projects with condos or townhomes where access is an issue for our larger machinery.” Moneric Equipment Rental has machines on a long list of jobs every day. One of these is the Treasure Island project currently underway in San Francisco. The site was initially built to host the World’s Fair in 1939 before being transformed into a U.S. Naval station in 1941. Treasure Island is now being { Continued on page 18 } C A LCO N T RAC TO R .CO M
Corporate Office Sales Manager - Henry Nosan Territory Manager - Mike Davidson Territory Manager - Allen Gutierrez
951-257-3687 951-807-7683 760-578-9808 951-616-7167
Dispatch 951-214-5246
www.c5rentals.com FULL LINE OF BARE & OPERATED EQUIPMENT AVAILABLE SCRAPERS
CRAWLER DOZERS
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• TRACK SKIDSTEERS • WATER EQUIPMENT • WHEEL DOZERS
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C5 IS CONSTANTLY UPDATING THE FLEET
All of C5 Equipment Rental machines are compliant with current EPA standards. Additional select Tier 3 and Tier 4 emissions compliant machines available, upon request. (951) 257-3687 / 21921 Alessandro Blvd | Moreno Valley, CA 92553
CERTIFIED DEALER
Moneric Equipment Rental working at River Islands a planned community on the Sacramento-San Joaquin River Delta in Lathrop.
{ Continued from page 16 }
transformed into a $5 billion, ecologically focused, and sustainable new residential and retail development. The project is being built in phases, and De Silva-Gates of Dublin is currently contracted for grading and utility construction on-site. “This is a high-profile job that had certain requirements and goals for small business participation and was also an entirely Tier 4 project,” continues Eric. “We have been supplying equipment to the job site since 2018 and expect to have machines out there for the remainder of Phase 1 activity.” Eric points out that this particular project involves widespread use of different types and sizes of heavy equipment. “We have had excavators and haul trucks as well as re-rented K-Tec pull 18
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scrapers on-site and currently have Cat scrapers, dozers, and support equipment on the job. We average four to eight pieces on-site at a time and have had around 20 separate machines on the job to date. The current phase is geotechnical improvements that involves moving hundreds of thousands of cubic yards of dirt and placing them in strategic stockpiles while allowing the underneath soil to consolidate as part of the overall soil stabilization process.” Eric McCosker says that market demands drive the need for more equipment in their fleet, and he says things are very busy right now. “Typically, we try to stay away from purchasing what we already have access to or what other rental companies have readily available. I believe that
our focus in this niche market is what sets up apart from the sea of other rental companies. We remain diversified with a variety of machines that contractors sometimes can’t find available,” continues Eric. “Contractors shop around, and we know that we have to be the best when it comes to maintenance, uptime, responsiveness and customer service. We have been successful because when the customer gives us an opportunity, we know that they will see and feel the Moneric difference, and repeat business is what it is all about in this rental game.” For more information on Moneric Equipment Rental or to rent a machine, please call Monica Johnson at (925) 586-2027. Cc
C A LCO N T R AC TO R .CO M
Moneric Equipment Rental Monica Johnson: 925.586.2027
Working together to o er all of your “Big Iron” and small equipment needs. MSHA compliant and TIER 4 equipment available!
CAT 657 Tier 4 Scraper
CAT 740B Tier 4 8,000 Gallon Water Truck
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CAT D8T, D6T Tier 4 Dozer Volvo A40F/ CAT 745C Tier 4 Ar ulated Dump Truck
CAT 336EL Hybrid Tier 4 Excavator
CAT 16M & 14M Tier 4 Motor Grader
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CAT 950K, 962K Tier 4 Loader
Access to over 300 pieces, including Tier 4 and GPS ready equipment
Check out our Digital Edition at CalContractor.com Call Kerry Hoover at
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RE N TA L EQ UI PM E N T / 2 0 2 0
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R ent Your N ext P iece of E quipment from the I ndustry P rofessionals at
KCS RENTALS, INC. By B
r ian
Hoo
They H ave B een W here You A re and K now Your B usiness
ver,
Sen
ior
E di t
or
W
ouldn’t it be nice if you could rent construction equipment from a company that actually knows the civil engineering construction industry firsthand? Perhaps, someone who has worked out in the field, operated equipment, ran jobsites, and even grew up in the business? Well, when you rent from KCS Rentals, Inc. (KCS Rentals), that is exactly what you will receive. Carlos Silva is the owner and president of KCS Rentals and also the owner of Silva Backhoe Services, Inc. He comes from three generations of contractors, including his father, grandfather and uncles, and was raised from birth in the business. “I can’t remember a time in my life when I wasn’t doing something related to this business,” says Silva. “My family has been in the excavation and backhoe business for quite a long time, and my dad started Silva Backhoe Services back in the 80s, and I joined the company, officially, in 2000.” Carlos took over Silva Backhoe Services in 2010, which also happens to be the year he started KCS Rentals. “We were already doing the excavation work for our long list of clients, and so I started catering to their bare rental needs as well. 20
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It just made sense,” says Silva. KCS Rentals serves all of Southern California, on up into Kern and Ventura counties. The bulk of their fleet is made up of backhoes, mini to medium-sized excavators, skid steers, skip loaders, track loaders and reach lifts. KCS also owns and rents propane forklifts, truss jibs, 5-yard dump trucks, along with a transportation lowboy service. Their equipment fleet is comprised of several major brands, including JCB backhoes, telehandlers and a compact excavator. “I am always looking for good deals on low hour or brand-new equipment from select rental yards and distributors. I have done the research on what brands our customers prefer, and that is what I try to keep in our fleet,” continues Silva. “I have been dealing with the folks at JCB for around 20 years, and they have always come through with high performance, reliable machines at the best rates and best warranty around.” C A LCO N T R AC TO R .CO M
KCS Rentals owns and rents several JCB machines, including three JCB Telehandlers, two JCB backhoes and one JCB mini excavator. Silva purchased the three JCB Telehandlers last year. According to Silva, the 2019 JCB 505-20 (5,500 lb. capacity/20 feet max lift height) telescopic handler was purchased brandnew, the 550-140 (10,000 lb. capacity/44.3 feet max lift height) is a 2016 that was purchased on lease return, and the JCB 532 (7,000 lb. capacity/39.38 feet max lift height) telescopic forklift was purchased used at low hours. “I also purchased our JCB 85Z compact
excavator brand-new in 2016, and it is a very popular machine. We have three JCB backhoes in our fleet. Two are JCB 3CX-16 Super units, along with a 3CX offset backhoe,” says Silva. “We have machines from just about every major manufacturer, and everyone has their preferences. I have to say that these JCBs are all rock-solid machines, and many of our customers request them again after trying them out for the first time.”
Top: Carlos Silva, owner of KCS Rentals, operating his new JCB 505-20TC Telehandler on a jobsite in Fontana. Below Left: KCS Rental’s JCB 532 Telescopic Forklift ready for an on-time delivery. Below Right: KCS Rental’s JCB 3CX on a jobsite in Fontana.
Right: JCB 550-140 Telescopic Forklift on rent from KCS Rentals. Shown here loading material for a new parking structure project at Manhattan Village in Manhattan Beach.
KCS Rentals maintains around 85% utilization at all times, and they are expanding their operations with the acquisition of their new yard and facility in Wilmington. “We will soon be moving to our new industrial zoned yard in Wilmington, where we can serve our customers better,” says Silva. “Knowing what our customers need and want is our top priority at KCS. We work with some of the best people in the business, including our JCB representative, Bryan Bernardino, vice president of sales for SoCal JCB. I have worked
with Bryan for 15 years, including two years at SoCal JCB. I can’t say enough good things about Bryan, as well as John Console in the service department. I call either one of them after hours, and they will do whatever it takes to take care of our needs. Carlos Silva has been through and experienced just about every part of the civil engineering construction industry. He knows what his customers are looking for and what they are dealing with in the field. “I think KCS Rentals has a little something extra to offer our rental customers. I have been in most of their situations and have faced the same challenges
as a contractor. They need the right machine for the job. One that will provide the most productivity with proper digging depth, for instance, or appropriate reach and lift capacity,” continues Silva. “Our clients know they will get the right machine at the right price when they call on us. They also know that if we are needed out on the jobsite, we will be there within a few hours of the initial call. Professionalism, knowledge, and exceptional service is what our business is all about.” If you are in the market for compact to medium-sized construction equipment rentals or reach lifts, give Carlos a call at KCS Rentals at (310) 864-8454. Cc
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866-JCB-SCAL / 866-522-7225 14675 Valley Blvd Fontana, CA 92335 bryan.bernardino@SoCalJCB.com www.SoCalJCB.com Terms & Conditions: Picture shown with optional accessories. Offers valid until March 31, 2020. Financing and published rates are subject to JCB Finance credit approval. Offers may change without notice and may not be combined. Additional terms and conditions may apply, please contact your local JCB dealer for details. JCB dealer reserves the right to withdraw, alter or decline any product from sale or any offer without prior notice. Price, if shown, does not include government fees, taxes, dealer freight/preparation, dealer document preparation charges or any finance charges (if applicable). Final actual sales price will vary depending on options or accessories selected.
RENT, LEASE OR BUY — WHAT’S THE BEST OPTION FOR CONSTRUCTION EQUIPMENT? By Agako Nouch, Vice President, Sales, and Ryan Sherwood, Vice President, Retail Development, Volvo CE
conomic conditions and market uncertainties have big impacts on whether construction customers are renting, leasing or buying equipment. Recently, there’s been a healthy level of activity in all three as the demand for construction equipment has grown along with the economy. Contractors have been buying more machines, but they’ve also been using more rentals and leases to supplement their owned fleet. There’s no right or wrong answer — it really depends on your unique situation. To help you understand your options, we’ve laid out some pros and cons of renting, leasing and purchasing your next machine.
RENTING Renting is typically most popular for shorter term needs (months or weeks). Also, smaller companies may not own many pieces of equipment, and therefore may rent more often. If you’re interested in renting, you’ll want to keep machine availability in mind. The more standard a machine is the more likely it will be available for 24
REN TAL EQU I P MENT / 2 0 2 0
rent, whereas specialty equipment is typically more difficult to find and rent for short terms. Pros • Most flexible (month-to-month payments) • Lower capital requirements • Not responsible for maintenance • No need to put a rental on the balance sheet • Pay only for use and time you need it • Can opt to try before you buy with a rental purchase option (RPO) Cons • Possible use restrictions • Usually has higher monthly payments than loan financing and leasing (like buying a house, buying a machine has a slightly lower payment than renting, and the buyer is building equity). • Likely to incur charges for damages • Higher long-term use cost • Limited to what’s on the lot • Some specialized equipment may not be available when it’s needed
• In the U.S. right now, all rental payments may be expensed against taxable income, but currently with ownership, the full price of a machine could be depreciated for tax purposes in the first year; however, you should check with your tax advisor for your individual situation. • Rental companies and dealers have the right to swap out a rental machine if it’s sold, which could cause delays and/or operator re-training.
LEASING Leasing adds a blend into the total ownership/use mix of your fleet, which most companies like. Leasing is more flexible than buying, but less flexible than renting — you have to commit to a period (usually 24 to 60 months). Typically, companies that have access to their own source of capital choose to buy rather than lease. Most equipment can be leased, but the more specialized a piece of equipment is, the higher the relative cost of leasing becomes. This is because the party leasing { Continued on page 26 } C A LCO N T R AC TO R .CO M
T R U S T U S ‌W E K N O W R E N TA L ! E X C A V A T O R S
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Cons • Fixed term with obligations that you have to keep (e.g., 24-month lease) • Commitment period is typically much longer compared to rental • Never really build any equity • Contract hours can be a challenge If you build in more contract hours than you use, you’ve effectively. paid more than necessary because unused hours aren’t refunded. Conversely, there’s a significant penalty for using more than the contracted hours — same as there are with miles on a leased car.
{ Continued from page 24 }
the equipment may not have a big enough secondary market to sell the unit upon its return. Cost of equipment can also play a role, as more expensive equipment ties up more capital. Currently, the number of leases relative to the amount of transactions (lease, finance purchase and cash purchase) is down significantly from 2018. Previously, lease payments may be incurred on the profit and loss (P&L) statement and may not affect a customer’s balance sheet. However, due to changes in International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Account Principles (GAAP), leased machines may now need to be added to the balance sheet and depreciated over the period of the lease, as would a financed machine or a machine purchased outright (rentals may not need to go through the balance sheet). Be sure to check with your tax advisor before making these decisions. Pros • Typically, low monthly payments compared to rental • Return the equipment at the end of the lease term • No large initial capital outlay • Choose the specific features you want on the equipment • Get a brand-new piece of equipment versus rental units that may have substantial hours on them 26
BUYING Some companies prefer to buy equipment as it’s part of their long-term capital strategy (that’s also sometimes true with leasing, but not rentals because they’re not building equity by renting). And recently, owner operators have trended more toward buying versus leasing. When buying, opt for bundled services, such as an extended warranty and a service agreement, to ensure your equipment is properly maintained. Today, there are monitoring services like Volvo’s ActiveCare Direct® that monitor equipment functions and alert owners and/or dealers of any major issues. These services are available for leases as well.
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Pros • Equipment ownership and building equity • More economical for longer term needs
• You know the machine’s health and its dependability • Currently in the U.S. you may be able to generally depreciate the entire cost of the machine in the first year, versus only the payments in a lease; this holds true for both new and used equipment • Pride of ownership Cons • May be cheaper to rent for short-term needs • The least flexible option — once you buy it, you own it • In cycle management, you may want to de-fleet as your work slows down Volvo Financial Services When you’re in need of a new machine, Volvo Construction Equipment and Volvo Financial Services partner to help you find the best financial option for your specific situation. Many contractors can get into the habit of leases only, which doesn’t always make good financial sense. Through our extensive dealer network, we provide a broad range of options and pride ourselves on being very flexible at tailoring programs that work specifically for you. Finally, if you’re in the market for high-quality used equipment, our wide range of Volvo Certified Used machines is available under the “Certified” icon on our used equipment site. Check out our used inventory today. Cc C A LCO N T R AC TO R .CO M
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Crane Division
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Commercial Credit Group Inc.
THERE’S MORE TO EQUIPMENT FINANCING THAN RATES By Julie Murphy, Vice President – Marketing, Commercial Credit Group Inc.
MORE TO
EQUIPMENT FINANCING THAN JUST
THE INTEREST RATE! When discussing an equipment loan, many companies begin with the question, “What is the interest rate?”. What most people don’t understand is that interest rate is actually a very small component of overall financing costs. And cost isn’t the only piece of the financing puzzle. In the world of construction equipment financing, relationship often plays a much bigger role than interest rate or monthly payment. Almost Any Company Can Lend Money Let’s be honest. There are a LOT of companies that offer equipment financing. These include: • Captive finance companies (finance arms of equipment manufacturers) • Independently-owned finance companies • Banks • Online lenders And within each of these classifications, there are many options. Some lenders have more experience in the construction industry than others, and understand the industry, the business, and the equipment. Many lenders require personal credit scores to approve an equipment loan, much like they would with a personal loan. Additionally, there are various types of loan structures available to contractors. Some lenders only provide equipment purchase loans and/or leasing. Others also offer refinancing, debt consolidation, or cash-out (working capital) loans. A machine acquisition can be straightforward, requiring a small down payment and simple loan 28
REN TAL EQU I P MENT / 2 0 2 0
structure. Larger purchases could involve refinancing of existing assets, cash out for accessories purchases, and an equipment loan to acquire the new machine. Lenders familiar with this type of deal structure will already have the needed processes in place to ensure a smooth transaction. The type of loan needed is dependent upon the needs of the company, and these needs change over time. It’s important to match the lender to your overall financing needs. Committed to the Industry As with many industries, construction can be cyclical and seasonal. In the good times, money is plentiful and lenders are abundant. In the down times, many financing resources retreat from the market. In the aftermath of the 2008/2009 financial crisis, funding for the construction industry became scarce. Companies shuttered, equipment remained idle, and many banks and lenders pulled out of the market. They weren’t willing to take the risks associated with the slowdown. This made it even more difficult for the contractors that were operating to obtain funding to help them through the slowdown, and not just for new equipment purchases. Lenders that have experience with the industry, understand the cyclicality, have a greater percentage of their business with contractors, and are long-term players. Developing a relationship with this type of lender can be essential to a company’s ability to navigate all economic cycles. C A LCO N T R AC TO R .CO M
The Value of Relationship While industry experience and expertise are very important, relationship also plays a large role in a good financing partner fit. Face-to-face contact is always helpful. A representative that takes a personal interest in a business and that answers the phone, on the weekends and after hours, can be especially helpful when you need a quick response to take advantage of opportunity or in times of trouble. There are times when a business may have trouble making loan payments - this could be due to a slow-paying customer, loss of contract, machine downtime, etc. When faced with this situation, does the finance partner offer options for delayed or skip payments? An industry-savvy, relationship-based partner sometimes will. The key to that relationship is open and honest communication. As with any relationship, it’s a two-way street. Communication can go a long way to the partner’s understanding and willingness to work through a situation. Ask the Questions To determine if a lender is an appropriate fit, ask some key questions. • •
• • •
How long have they served the construction industry? Has their commitment to the industry been opportunistic or continual – meaning were they fully committed in an economic downturn? Do they have experience financing the type of equipment being purchased? What types of loans and finance structures do they offer? Do they provide a personal contact?
The answers to these questions will help determine if the finance partner is a good fit for your business. And there is nothing wrong with talking to multiple lenders. Much like interviewing multiple people to fill an open job position, having confidence in your financing partner is critical to long-term success to ensure a good and lasting business relationship. For more information, visit www.commercialcreditgroup.com/industries/ construction-equipment-financing Cc CALCON TRAC TOR .CO M
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