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Discussion – 


Discussion – 


Forecast 2023: what to expect in the equipment rental industry

As 2022 comes to a close, we look ahead with some predictions for the equipment rental industry in 2023.

Given the turbulent times we live in, supply chain issues, a looming possible recession, and rising interest rates, most of our predictions involve a cooling period in the equipment rental business. Here is what we expect for 2023:

Used equipment prices take a hit

Between new machines slowly becoming more available, and work slowing down in some areas of the country, used equipment prices will continue to drop to a more balanced point after hitting a record level fueled by tight supply, lots of work, and cheap interest.

Though we expect to see prices cool in from the 2022 peak, they will still be above the norm as supply chains work themselves out.

New equipment prices increase slightly

Driven by (still) high material and labor costs, new equipment prices are expected to increase slightly in 2023, though we don’t expect the same percentage gains as previous years. Furthermore, while the chip shortage appears to be improving, there is still more demand than current supply.

Equipment rental rate growth softens

Due to a low supply of equipment and an abundance of work in the two previous years, equipment rental rates have steadily increased. While rates will still rise gradually as equipment can be scarce and people choose to rent vs buy due to instability in the broader economy, contractors should expect single-digit percentage increases in 2023 according to the American Rental Association.

Even though rent growth will slow, it is not expected to be negative says the ARA.

Rental equipment utilization remains high

Despite a moderation of rental rate growth, we expect equipment utilization to remain high. With the biggest challenge being having the service personnel to turn machines around quickly when it comes off rent.

This means equipment will still be tight during peak seasons and contractors should plan ahead to make sure they have the gear they need when a job is awarded. Most equipment managers remember how challenging it was to secure a water truck for rent in the summer of 2022 because they were already out working.

Rental companies fleet continue to age

Because replacement machines have been more difficult to source, and demand has stayed high, many equipment companies are operating a fleet that is older than previous years. For 2023 we predict more of the same.

This will vary by supplier (for example, all of our water trucks for rent are less than two years old), but as a rule expect older machines with more hours.

Financing cost more than previous years

Equipment financing will continue to cost more than in early 2022 and 2021 as the federal reserve continues to try to tame inflation. While interest rate increases in 2023 will be less than 2022, policymakers expect rates between 4.75% and 5.75% compared to 4.5% and 4.75% today. Note, this is for the federal funds rate and equipment finance rates are usually 3-4% greater.

While the rental equipment industry has seen some record growth the past few years, we expect 2023 to trend to a more normal equilibrium. We look forward to revisiting these predictions next December to see what we got correct and what was different.

Tell us what you think! Drop us a line.


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