The current dismal economy brought an unexpected bright side to the construction industry: The number of equipment rental stayed the same or has increased across the U.S. And, in the Upper Midwest, the trend continues to be rent first, maybe buy later.

Mark Barry, branch manager of Diesel Machinery Inc., Rapid City, SD, said contractors are renting heavy equipment as much as, or more than, they have in the past. "Contractors in this area work on mainly sewer and water projects, commercial buildings, and streets and roads. They rent mainly utility and underground equipment."

Diesel Machinery in Rapid City sells, leases and rents heavy construction equipment in the western half of South Dakota and a small area of both Nebraska and Wyoming. "Our main brand is Komatsu," said Barry. "We also carry Link-Belt and other brands in excavators, loaders, dozers, and compactors. They're all heavy equipment and, primarily, we rent to dirt and utility contractors."

The economy has not changed from last year, but Barry predicts it will change in 2009. However, "rentals have increased over the years. It's the cost of doing business, the cost of owning your own equipment and, in many cases, contractors figure they will rent equipment for a month or two instead of owning the equipment."

For example, Barry continued, "equipment rental will increase in 2009 because contractors are looking at committing $200,000 to purchase equipment versus $5,000 to rent equipment for a month. Most contractors rent for the short term with many renting by the week, and some contractors will rent by the month. Rentals are more popular in summer, during construction season. Now, everyone is saying, 'winter is coming and we better hurry up and get this project done.'"

General Equipment & Supplies, Inc., Fargo, ND, sees a similar trend. The company sells and rents not only heavy construction equipment but also crushing equipment. "We work with many local contractors who purchase equipment from us, but they use the rental option to try a new model while they're expanding their business or looking to replace what they have," said John Larson, equipment sales coordinator.

Larson emphasized that one of the most popular method to acquire equipment is rent to purchase. "Every piece of equipment we rent has a purchase option and, if contractors want to buy, we apply most of the rental cost, sometimes 100 percent, to the purchase price."

General Equipment & Supplies carries its major brand, Komatsu, within North Dakota and into a small part of western Minnesota. Other brands the dealer carries are Pioneer, JCB, JCI, Mesaba and Superior, which are conveyors, truck unloaders and crushers. "Contractors work on varied projects, from roads to oil rigs to different types of mining," Larson explained. The larger pieces of equipment serve larger projects in oil and mining.

"With the Komatsu line of construction equipment, there's an even split between purchase and rental," said Larson. "But contractors are renting equipment more now because they are unsure about the economy and don't want to get into large purchases when they're not certain where their business stands. We work with local contractors, of course, and a large percentage of them like to rent equipment, especially large equipment, first because it's a drastic move to buy. We do introduce them to the purchase option when they rent."

Larson said some national contractors rent from General Equipment when they work on North Dakota projects. Usually they rent the familiar brands of equipment because they don't want to transport their equipment all over the country, he said.

Ziegler Caterpillar, with headquarters in Bloomington, MN, has a rental division that is seeing increases in Caterpillar equipment and other brands it carries, including Grove cranes and JLG. "We rent every contractor's equipment from the smallest chipping hammer to the largest rough terrain crane, all Caterpillar equipment, and other brands," said Dave Lillquist, general manager, Ziegler Rental. Most Cat dealers rent the allied product line, which is any non-Caterpillar equipment, including pumps, compressors, boom lifts and telehandlers, according to Lillquist.

"Usually during a downturn in the economy, rentals go upward and we have tremendous utilization of all of our product lines in this challenging year," said Lillquist. "Sales are certainly down and big ticket sales are not what we'd like to see, but rental is strong across product lines. The best rentals for Ziegler are the telehandlers, but in our fleet of 400 pieces of rental equipment, we see 80-percent utilization at any given moment."

Ziegler's rental fleet includes 30 to 35 different manufacturers that it offers at every branch office. Lillquist said large contractors based in Minnesota have rented or leased over 200 pieces of equipment that are working in states from New York to California because these contractors are pursuing jobs outside of the state. "We get the support of other Caterpillar dealers for service on the equipment."

The average age of rental equipment at Ziegler branches in Minnesota is under two years, which is very new under industry standards. "Ziegler allows most of its equipment to be sold from the first day we put it into the fleet," explained Lillquist. "There's no restriction on when someone can buy a piece of equipment."

One area that has increased equipment rental is alternative energy projects across the U.S. Lillquist said with these projects — biomass to wind to nuclear — Ziegler sees much of its fleet rented for projects to expand energy. Larson said oil rig projects and mining projects in North Dakota have increased his sales and rental equally.

With the growth of Rapid City, Barry sees an increase in commercial projects that pushed equipment rental to heights he didn't expect. "We try to keep our equipment in the rental fleet for less than three years and keep reducing the price when we rent the old equipment. Sooner or later, a contractor will keep it."

The trend of renting first and buying later is more prevalent in the Midwest, according to the three rental agents. "In the Midwest, people have the pride of ownership and still want to take possession of something," said Lillquist. "But they're starting to see the benefit of transferring capital cost, maintenance and storage of this equipment to rental companies."

With more transient contractors across the country taking projects in other states, the rental dealers say they're becoming more national in scope and service and see the increase in equipment rental and their equipment working in locations outside of their areas. That's good news for all equipment dealers.