Rental – finance by another name?

01 May 2008

“When does rental become a finance arrangement?”asked Neil Dickinson, managing director of Finning UK, Caterpillar's UK dealer. “My definition of ‘rental’is where the used equipment at the end of the agreement is my problem-it's been on my balance sheet and is mine to sell.”

Whether this can be seen as pure rental or not, the market appears to be booming. “The market for all those who want to rent machines in the sense that they never want to own the machine, never have it on their balance sheet, is a huge opportunity,”said Mr Dickinson. “This kind of arrangement can be compared to ‘peak shaving’in the energy industry. Companies want to own enough machines to provide a base level of capacity. But what if most of this is tied up on other work and they get another job, just for a year, say?

“Traditionally they might sub-contract some of it to someone else, but of course they risk losing control of the project. Increasingly these companies don't want to lose control of the project for the sake of not having enough machines, so they take them on some sort of rental/finance arrangement.”

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