If adding a rental component to your dealership’s business plan hasn’t been a priority, you may want to rethink the possibility.

We visited with Greg Bennett, director of sales recently about HBS’s integrated software business that many dealerships, construction companies and rental outlets use to keep track of their equipment. 

The conversation led immediately to a growing interest by many firms to embrace rental fleets.

Bennett reports a steady increase in the company’s clients who are using rental fleets to expand their business, and ultimately boost sales of new and used wholegoods. 

His observations in the U.S. mirror global expectations by Technavio Research of an 8% growth rate through 2022 in rental access to specialized and traditional farm equipment. 

Additionally, MarketWatch reports the global farm equipment rental market is expected to grow more than 7% through 2027 and is expected to reach a market value of more than $78.5 billion through the period.

“There have been many articles published recently about dealership expansion and the positive part rental equipment plays in that growth,” he explains. 

“At some point we’re going to see 60-70% of all new machine sales going through a rental channel before being sold to an end user. I think we’re getting there faster than many people realize.”

According to Bennett, the business change began with the economic downturn of 2008-09 when retail sales plummeted and manufacturers turned to rentals in company stores to keep assembly lines moving.

“Caterpillar proved through this period if you put a rental fleet inside your dealership, it will increase and drive sales and revenue,” he says. “Historically, that’s been the opposite mindset of many dealers who only want to sell equipment.

“Their thought process is, ‘If I rent this equipment, the customer won’t buy,’ but that’s been proven to be incorrect,” he explains. 

Bennett says many times price point hampers sales of new equipment, but if a dealer can rent machines and maintain cashflow — meanwhile depreciating the machine down to a point where it’s more attractive to buy — that ultimately drives sales.  

He says integrated fleet management software allows a dealer a “real time” way to monitor the depreciated value of each piece of equipment in the system so that at any given time an accurate value can be placed on the item.

“It’s not just the ‘in and out’ rental income that’s important, it’s using rentals to grow a dealership,” he explains. “Depreciation is a tool that can work for you if you know how to track it.”

Bennett says a dealership is built on the “sell mindset” so being able to price an asset without incurring a loss is vital and that depends on knowing the exact value of the machine at any given point.

“Unless you’re tracking all of the rental fleet with tools that allow you to know current depreciated values, you can quickly be upside down on a piece of equipment and unknowingly sell it for a loss,” he says. 

“Actually, this applies to all of a dealership’s equipment, not just the rental fleet. It can be the service vehicles, the company pickup trucks, even the lawn mower used to take care of the grounds around the dealership.”

The other way rentals can drive sales is through exposing customers to new technology at a teachable moment.

“A customer may rent a piece of equipment with the idea that they don’t need the equipment all the time and renting is a good alternative to the cost of ownership for just one project,” he explains. 

“Many times, after having access to a rental machine, the customer will realize how the tool could improve their operation throughout the year and will find a way to make a purchase.

“When a customer makes that buying decision, it helps the dealership thrive. Because of this, I think rentals need to be a bigger piece of what we in the industry talk about in plans to expand our businesses.”