A Case for Equipment Rental - Part 1
To better understand how contractors can benefit from rental services and what they can expect, we talked to Mike Crimaldi, owner of Rig Source Inc., a rental firm located in Elburn, Ill., that provides environmental and geotechnical drilling and support equipment.
When asked why contractors might think about renting equipment, Crimaldi, a 25-year veteran of the drilling industry, explains, “It's cheaper to rent. A start-up company would rent for a few months - and maybe spend $14,000 for a rental. If they were going to buy a rig, it would cost them $100,000 or $200,000 for that same machine. So there are advantages.”
Likewise, rental equipment can allow a contractor to undertake additional projects during busy times when the rest of the company's equipment is committed elsewhere.
Another big perk? Being able to rent can save a project when there's a breakdown. Instead of wasting precious time and dollars on a lot of downtime, a rented rig can be brought in to finish the job.
Crimaldi describes one emergency situation: “We had a guy call this morning; his engine's no good on his machine and he's panicking - he doesn't know how to fix it or what to do. I said, 'Well, you're in Evansville, Ind., you can drive up here and drive back, as long as you've got your paperwork in order. You've lost a day, but tomorrow you can go back to the same job and finish working with my machine.'”
One significant advantage of rentals is that unlike newly manufactured rigs, they're available now. Crimaldi points out, “If you buy a new rig today, it can be a 14-month delivery time.” As such, the demand for rentable equipment is getting more popular. Conversely, however, he points out that while new rigs can be made to order, available rental machines may not always be the brand the contractor wants.
As with anything, there are downsides to renting. There's the obvious, that when all's said and done, the equipment is not yours and you have to return it when the contract is up. “The downside,” Crimaldi notes, “would be the rental money doesn't go toward any type of purchase unless you want to buy something up front.
“The other downside to rental would be the transportation cost of getting a machine to the customer. Even if you say the rental is $3,000 - super cheap - and the guy's in Connecticut, from Chicago there are transportation costs. It's cheaper to put it on a truck or have somebody tow it out there but it's still inconvenient because the truckers don't seem to commit to a certain day. It's hard to get a pick-up day and drop-off day. Transportation can be a bit of a battle. It always works out, but you have to pad your days a little bit. The best is if the [contractor] is within a certain region, he can drive up here with his trailer. If you're within driving distance, there's a huge advantage. If you're not, then you've got to pad everything a day or two for transportation - both ways.”
The length of rental contracts varies, according to company policies and contractors' needs. “I'd say it's more popular to do a month because it's cheaper,” Crimaldi states. “We do weekly rentals, too. Three weeks in a rental is the same as a month; three days basically is the same as a week. We don't charge the rental period for the transportation time.”
In order to rent equipment, the one thing drilling contractors need to have, Crimaldi explains, is, “renter's insurance. They have to have the right insurance to cover the machine while it's in their care. I insure as well, but it's only if they don't have coverage. So they have to have the right insurance.”
The only other expectation is that the contractor would treat the equipment well, something that's rarely a problem: “The care usually is pretty good. We do have a security deposit, a damage deposit we call it. Generally, the returns have been pretty good.”
For drilling contractors in a bind who need a good machine fast or for companies looking to expand their marketing offerings without having to make a huge capital expenditure to get started, used rented equipment remains a viable option. For those who can't resist the urge to own, renting still remains a possibility, as some equipment rental companies also offer rent-to-own options.