golf course builders association of america
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Equipment Symposium Annual Summer Meeting – St. Augustine, FL 1:30 – 4:30pm The Rent v. Buy Decision. Golf Course Builders Association of America. Presented by: David Zipps - Cat John Hale – John Deere John Washburn – Sunbelt Rentals John. www.gcbaa.org. - PowerPoint PPT PresentationTRANSCRIPT
Golf Course Builders Association of America
Presented by:David Zipps- Cat
John Hale – John DeereJohn Washburn – Sunbelt Rentals
John
Equipment SymposiumAnnual Summer Meeting – St. Augustine, FL 1:30 – 4:30pm
The Rent v. Buy Decision
www.gcbaa.org
Structural Change – Ownership to Rental
• Equipment rental increasing in popularity
• Penetration estimates vary, but industry experts agree we are near 40%
• What is driving the shift?– Life cycle cost associated with ownership– Availability/OEM capacity– Access to Capital– Rental industry that is far more reliable than not too distant past– Recovery or not??
A General Rule of Thumb
• Equipment utilization is >65% = Own
• Anything less…
RENT IT
The Cost of Ownership
• What is the cost of owning equipment?– Cost of the asset– Depreciation– Interest– Preventive Maintenance – Repairs– Transportation– Storage– Inspections– Insurance
Total Cost of Ownership:
Ownership CostsOperating Costs
Administrative Costs
Total Cost of Ownership:
Ownership CostsOperating Costs
Administrative Costs
The Cost of Ownership - Example• Consider the initial investment on a hypothetical piece of equipment
– Purchase cost of $100,000– Used price after 5-year lifecycle of $25,000– Depreciation of $75,000
• Now, add these costs– Interest of 6%– Insurance, taxes and associated fees of $6,000– Wear parts of $18,000– Preventive maintenance of $8,000– Repairs of $25,000– Administrative cost of $8,000
• Now, add more costs– Transportation– Operator– Fuel
Note: cost estimates based on equipment usage of 2,000 hours annually
Additional Considerations• Financing equipment reduces your cash flow
• When owned equipment breaks down, you may need to rent it
• Repairs will require a maintenance staff or hiring an outside firm
• Transportation will require the right truck size and a driver with a CDL
• Project Backlog
• Target Fleet Mix (owned versus rent)
• Government compliance– Tier 4– Environmental regulations
Does Renting Make Sense?• Conserves capital
– No large outlays of cash are required
• Minimized Headcount
• Saves the storage costs
• Gives you the right equipment for the job– Fitting the equipment to the application
• Controls your inventory– Only have the equipment on hand when required
• Reduces downtime– If equipment breaks down it is repaired or replaced within four hours
• Leverages efficiencies– Take advantage of on-line tools to manage inventories, pay invoices, etc.
John Washburn, Vice President of Sales
THANK YOU!