Rent vs. Buy

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Rent vs. Buy

• Internal
• XX/XX/2009

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Why Customers Rent

• Trend toward outsourcing
• Improved customer focus on specific needs
• Renting avoids large cash outlays
• Renting improves asset allocation
• More flexibility and availability in peak demand
  times

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12 Reasons to Rent

• Control expenses
• Control inventory
• The right equipment for the job
• 24/7 customer care
• Save on storage/warehousing
• Reduce downtime
• No need for maintenance
• Save disposable costs
• Cost control
• Equipment tracking
• No licenses
• Conserve capital

4
Revenue Growth
The North American rental industry has come a
long way!

Rental Industry Revenue Growth in North America
(in billions of dollars)
Source Custom Cost Evaluator, as published by
Equipment Watch magazine, a Primemedia company.
5
Room For Growth
Only about 1/3 of American equipment usage is
from rentalsRSC plans to change that!
Source Custom Cost Evaluator, as published by
Equipment Watch magazine, a Primemedia company.
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Renting Makes Sense

• Renting makes Financial sense!
• Breaking down the cost
• Costs are calculated using standard
  industry-accepted formulas
• Costs are calculated using standard
  industry-accepted formulas
• Calculations based on actual hours and actual
  dollars spent by equipment contractors
• Computations include manufacturers data, surveys
  and other industry inputs

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Cost Formula Intro

• The Custom Cost Evaluator (CCE) lists hourly
  ownership and operating expenses for construction
  equipment, using both fixed and variable costs.
• Fixed Costs are depreciation and
  equipment-related overhead, which begin when
  machine is purchased and keep adding
  upregardless of equipment use.
• VARIABLE COSTS include overhaul, field repair,
  fuel, lube, tires and ground engaging components,
  and occur during equipment use therefore, these
  costs are accrued during actual operating hours

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Cost Factor Definitions

• General Definitions
• Ownership Definitions
• Operating Definitions

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General Definitions

• Economic Life
• Annual Use Hours

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Economic Life

• Economic Hours reflect the average economically
  productive life of a machine used under normal
  conditions.
• Economic Life is the expected length of time,
  stated in total usage hours, that a purchaser
  would own a given machine.

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Annual Use Hours

• Annual Use Hours are the average number of hours
  per year that a machine is actually performing
  work (as determined by a survey of equipment
  owners).
• Annual Use Hours are based on single-shift
  operations. Equipment usage time is influenced by
  weather and other factors.

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Ownership Definitions

• Depreciation
• Salvage Value
• Cost of Facilities Capital (CFC)
• Equipment Overhead Costs (Indirect Costs)
• OverhaulLabor Parts

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Depreciation

• Depreciation refers to the capitalization of
  equipment acquisition cost over time. It is not
  meant to express the amounts used for taxation.
• Depreciation costs are based on the purchase
  price plus sales tax and original freight costs,
  minus the cost of new tires (if applicable),
  minus an allowance for salvage at the end of the
  machines economic life.

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Salvage Value

• This is the amount of a purchase price that is
  not depreciated over the machines economic life,
  AND is equivalent to the units residual value at
  the time of disposal (i.e. no gain/loss assumed).

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Cost Of Facilities Capital

• Cost of Facilities Capital (CFC) is an allowance
  for the cost of the money invested in
  machineryit is not the same as interest charges.
  
• This government-created formula applies whether
  the equipment was purchased in cash or financed
  over time.

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Equipment Overhead Costs

• Indirect Costs
• Equipment Overhead Costs result directly from
  equipment ownership.
• These costs include normal risk insurance,
  property taxes, storage and security, mechanics
  supervision, inspection, licenses and
  record-keeping costs.
• Profit, project overhead and general company
  overhead costssuch as office facilities and
  suppliesare not included in these costs.

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Equipment Overhead Costs (Indirect)
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Overhaul-Labor Parts

• Overhaul Labor is accrued for each hour that a
  machine works, to offset labor charges incurred
  to rebuild and condition major components, such
  as engines, transmissions, undercarriages, etc.
• Overhaul Parts costs are accrued for each hour
  that a machine works, to offset parts costs
  incurred for average, periodic rebuilding and
  reconditioning of major components.

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Operating Definitions

• Field Repair Labor
• Field Repair Parts
• Fuel
• Lube
• Tires
• Ground-Engaging Components (GEC)

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Field RepairLabor

• Field Repair Labor costs are accrued on a machine
  working hours basis to offset labor charges
  incurred to perform normal field repair and
  maintenance, such as adjusting components and
  repairing or replacing injectors, carburetors,
  batteries, ignition parts, pumps, seals, etc.

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Field Repair - Parts

• Field Repair Parts costs are accrued on a
  machine-working-hours basis to offset the costs
  for supplying parts normally needed to keep
  equipment operating in good condition.
• These parts consist of anything short of a
  complete component overhaul or major component
  replacement.

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Fuel

• Fuel costs calculated according to average load
  factors and the price of fuel per gallon.
• Actual fuel consumption will depend on variations
  in load factors, elevation, terrain, engine
  performance and operator efficiency.
• Calculations involving fuel costs should be
  adjusted for differences in the price of fuel.

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Lube

• Lubrication costs are accrued per machine working
  hour to offset the cost for oil, grease, filters
  and the labor and lube truck involved.

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Tires

• Tire costs are accrued per machine working hour
  to offset the expenses incurred for the repair
  and/or replacement of tires.
• Tire costs are based on the current price of
  tires, typical contractor discounts and average
  tire life.

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GEC

• Ground Engaging Components
• These costs are accrued on a machine working
  hours basis to offset charges incurred for the
  repair and/or replacement (either whole or in
  part) of ground-engaging components such as pads,
  drums, cutting edges, etc.

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See the Rental Advantage
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Customer Equipment Needs

• How can we drive more equipment users to
  outsource their equipment needs?

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Internal Rent vs. Buy Tools

• Utilizing each regions Champion to promote
  renting
• Continue district training sessions
• Print and electronic sales support materials
• Customer presentations comparing costs of renting
  vs. buying
• Direct mail to prospects
• Media support in trade publications

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Market Rent vs. Buy Tools

• Rent vs. Buy brochure for customers
• Rent vs. Buy examples in trade publications
• Customer testimonial sheets
• Customer flash videos
• Sales/Customer QA
• Presentations for customers
• Direct mail to current customers and prospects
• RSC trade publication advertisements public
  relations
• Tradeshow participation

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RSCs Advantages

• Over 465 locations throughout the U.S. Canada
• 24/7 Customer Care After Hours Support
• Over 2 billion in rental fleet/equipment
  inventory
• RSC Online Total Control management software
  programs
• Mobile Tool Room
• Short- or long-term rentals
• Equipment delivery and pick up
• New and used equipment for sale
• Usage and safety training

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Maximizing RSCs Potential

• We strive to be our customers best, and only,
  equipment provider!

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