Commercial Equipment Rental and Leasing

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 8,500 companies in the US rent or lease commercial or industrial equipment and machinery directly to businesses. Major categories for rental or leasing revenue include miscellaneous types of commercial or industrial equipment (manufacturing, medical, audio/visual, theatrical and motion picture, modular/mobile buildings, energy/power generating); construction, mining, and forestry equipment; transportation equipment; and office equipment. Firms may also sell new or used equipment, supplies, and parts.

Capital-Intensive Operations

The commercial equipment rental and leasing industry is capital-intensive, and firms typically have significant investment in fleet holdings.

Variable Equipment Market Value

Fluctuations in market value for rental or leased equipment affect a firm’s fleet management effectiveness because companies rely on the sale of used equipment as a source of revenue.

Industry size & Structure

The average commercial equipment rental company operates out of a single location, employs 20 workers, and generates nearly $10 million in annual revenue.

    • The commercial equipment and machinery rental industry consists of about 8,500 firms that employ 172,100 workers and generate $82 billion annually.
    • The construction, mining, and forestry sector accounts for about 37% of firms and 50% of industry revenue. The miscellaneous (manufacturing, medical, audio/visual, theatrical and motion picture, modular/mobile buildings, energy/power generating) sector accounts for 58% of firms and 46% of revenue. The office machinery and equipment sector accounts for 5% of firms and 4% of revenue.
    • The industry is concentrated; the top 50 companies account for about 55% of industry revenue.
    • Large companies include Aercap Group (commercial aircraft), United Rentals, and GATX. Large firms may have international operations.
                                    Industry Forecast
                                    Commercial Equipment Rental and Leasing Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    Mar 4, 2024 - Industry Growth to Soften
                                    • Amid a slowdown in some segments of the construction sector, commercial equipment rental and leasing industry growth is expected to soften in 2024. The commercial equipment rental and leasing industry posted year-over-year growth of 14.3% in 2021 and 16.5% in 2022 before declining to 5.8% growth in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Industry growth is expected to moderate further to 2.9% in 2024, then grow by about 4.5% per year through 2027, according to Inforum and the Interindustry Economic Research Fund, Inc. Total construction spending in 2024 is expected to grow about 2% compared to 2023, led by nonbuilding structures, according to construction consultancy and investment banking firm FMI. Spending on residential projects is forecast to drop by 3% in 2024. Despite weakness in the office and commercial segments, FMI expects spending for nonresidential buildings to rise 8% in 2024.
                                    • The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25) showed new business volume rose 6% to $9.3 billion in January 2024 compared to the same month in 2023. The MLFI-25 reports economic activity from 25 companies that represent a cross-section of the $1 trillion equipment finance sector. January’s business volume decreased 26% compared to December’s $12.5 billion, which is typical following the seasonal end-of-year and end-of-quarter rise in business activity.
                                    • The outlook for aircraft lessors is expected to be stable in 2024, according to Morningstar DBRS. Airlines want to increase capacity, but aircraft OEMs cannot fully meet the demand for aircraft, which is supporting lease rates and aircraft values. While aircraft lessors will have significant financing needs in 2024 - including funding new aircraft purchases and refinancing maturing debt – large lessors should be able to rely on banks and the unsecured corporate debt market for their financing needs.
                                    • Equipment and software investments are forecast to increase by 2.2% in 2024, slightly below the growth seen in 2023, according to the 2024 Equipment Leasing and Finance US Economic Outlook published by the Equipment Leasing & Finance Foundation. Interest rates are expected to put downward pressure on equipment investments in 2024, but there was moderate growth in Q4 2023, and that momentum is expected to remain through the first half of 2024. The Equipment Leasing & Finance Foundation expects demand to gain steam in the second half of 2024. However, the high level of US government contributions to GDP in 2023 will not persist in 2024, which could reduce equipment leasing demand if consumer demand and global economic conditions soften.
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