US Product Rental and Leasing Sector
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 51,175 product rental and leasing establishments in the US provide the use of commercial and consumer goods in return for lease or rental payments. Establishments may rent or lease nonfinancial intangible assets, including patents and trademarks (but excluding copyrighted works).
Seasonal, Uneven Demand and Cash Flow
Cash flow in the equipment rental/leasing sector is seasonal and driven by the dynamics of downstream industries.
Variability in Residual Value
Firms are exposed to financial risk when the market value of a vehicle or rental good is less than its depreciated value (residual value) when it is sold.
Industry size & Structure
The product rental and leasing services sector is comprised of 51,175 establishments that employ 585,900 workers and generate $210 billion in annual revenue, according to government sources.
- The product rental and leasing services sector represents 1% of the nation's Gross Domestic Product (GDP) and employs 0.4% of the country's workers.
- The sector is concentrated with the 20 largest firms representing 48% of revenue.
- In addition to employer establishments, the product rental and leasing services sector has 83,000 owner-operated establishments with no employees. Subsectors with the highest numbers of nonemployer establishments are commercial and industrial machinery and equipment rental and leasing (42%); automotive equipment rental and leasing (26%); and consumer goods rental (23%). The owners of nonemployer establishments typically perform the work and may outsource support functions like marketing and accounting.
- The product rental and leasing sector has shed about 4,100 establishments annually, which equals about 8.7% of existing establishments. However, the sector has added about 4,300 new establishments annually, which is equivalent to 8.4% of existing establishments. As a result, the sector has an average loss rate of 0.3%.
- The product rental and leasing sector is forecast to grow its employment base by 2.5% overall in 2021-2031, which is much lower than the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
Industry Forecast
US Product Rental and Leasing Sector Industry Growth
Recent Developments
Oct 8, 2024 - US Construction Spending Drops
- The total value of US construction put in place fell 0.1% in August 2024 compared to the prior month, according to the US Census Bureau. Residential spending declined 0.3% and nonresidential spending increased 0.1%. Nonresidential spending was mostly supported by public infrastructure projects. Conservation and development spending increased by 2.2% in August, while highway and street projects saw a 0.9% increase in spending. In the nonresidential buildings segment, growth was led by communication, which grew 1.3%. Amusement and recreation spending increased 0.9%, and lodging spending rose 0.8%. Spending on public safety projects grew by 0.6%, and healthcare spending rose by 0.1%. Construction spending for office, manufacturing, and transportation each rose 0.1%. Commercial spending fell 0.5% in August, while educational and office spending fell 0.2% and 0.1%, respectively. Construction activity is a leading demand indicator for construction equipment rentals.
- Clothing rental firm Nuuly, a brand of Urban Outfitters, has managed to eke out a profit in a fledgling industry that has struggled with losses, according to The Wall Street Journal. For Urban Outfitters’ fiscal quarter that ended July 31, the firm said Nuuly earned $5.3 million in operating income after posting a $2.4 million loss the same quarter a year earlier. Industry observers suggest Nuuly has benefitted from a highly automated operation and its parent company’s apparel business experience. While apparel rental has proven popular with consumers, especially Gen Z and Millennials, the industry has struggled with costs and logistics including washing and repairing garments and return shipping. According to US data and analytics firm GlobalData, US shoppers spent about $1.7 billion on fashion rentals last year and are expected to spend nearly $2 billion in 2024.
- High sticker prices and borrowing costs may be steering more drivers toward leasing a new car instead of buying, according to The Wall Street Journal. US light vehicle sales were down 1.9% in the third quarter of 2024 compared to the same period in 2023, according to Ward’s Intelligence. While auto sales have been sluggish, they are expected to see a slight gain over 2023’s 15.7 million units. However, 2023 sales were hurt by lingering supply-chain disruptions. For the five years before the pandemic, US auto dealers sold about 17 million units per year. Affordability is a significant issue, experts say. In September 2024, the average new car price was $44,467, according to JD Power. While that is down about 3% compared to the same period in 2023, the average price of a new car in 2019 was $34,600. However, more buyers are opting for leasing as it requires less up-front out-of-pocket cash. In Q3 2024, leasing accounted for 25% of new car sales compared to 20% in Q3 2023, according to Cox Automotive.
- Americans are increasingly opting to rent products instead of buying, either to save money, enjoy greater variety, or have more flexible lifestyles, according to The Wall Street Journal. More than 25% of Americans said they rent or lease their clothing, furniture, car, or electronics, according to a recent survey commissioned by Credit Karma. Amid high inflation, some consumers – many of them Gen Zers - find it more economical to rent items rather than buy. A lack of affordability in the home-buying market has contributed to a stronger rent-first mindset among young Americans, some of whom feel homeownership will likely remain out of their reach. Industry observers say renting day-to-day items has gained popularity as more rental companies have entered the market.
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