An index is born for the rental industry

The American Rental Association (ARA) has unveiled a new ARA Equipment Rental Penetration Index, which is being introduced at The Rental Show 2013 in Las Vegas.

“The ARA Equipment Rental Penetration Index is the association’s latest resource to help rental store owners and managers, manufacturers, and industry analysts and investors better understand the potential of the rental channel and its long-term prospects,” said Michael Kneeland, CEO of United Rentals, Greenwich, Conn.

At the request of ARA members, Moline, Ill.-based ARA convened a workgroup in September 2012 to develop a plan of work for estimating an appropriate measure of equipment rental penetration for the equipment rental industry. The new index was created with the research firm IHS Global Insight. 

“The basic concept of the ARA Equipment Rental Penetration Index is to measure the amount of equipment that is rented as a percentage of total construction equipment,” said Christine Wehrman, ARA’s executive VP and CEO. 

ARA used the index to analyze results covering 2003-2011, which shows rental penetration for construction machines was in the range of 40% at the beginning of the analysis to just above 50% in 2010 and 2011. The result is consistent with the expectation that in recent years the size of the rental fleet has increased relative to the construction fleet.

“Rental firms tend to measure their performance on a cost basis and the most often used cost base for rental equipment is original equipment cost (OEC),” said John McClelland, Ph.D., ARA’s VP government affairs, who helped lead ARA’s rental penetration index workgroup. “The OEC-weighted approach allows the ability to derive several components of the equipment rental penetration calculation using well-established data and techniques."