Hey everyone, I'm a new guy so please let me know if I'm not posting in the best place or something. I recently purchased a Cat CS-433C compactor which I will use on a few construction projects I have going. I also have a friend that does work with a grader and needs a machine like this from time to time. So I want to figure out what a fair rental price is for this machine. I figure he can rent one from the local place for 3500 per month. if you figure that gives you 40 hours a week for 4 weeks then you have 160 hours on the machine. So if you take 3500 / by 160 that's $21.875 per hour. I supposed he would get a slightly newer machine at the rental place since mine is a 97 model with 4600 hours on it. so I figure I'll let him use it and just charge him based on the hour meter at like $20 per hour. He would also be responsible for all the fuel and tires, abuse etc. just like a rental. Anyone have any thoughts on this?
I would have a minimum number of hours for a per hour rate. At least 8 for the first day, 24 per week (or something like that).
You need to have some provision on repairs and damages. Who pays for what. You should have some kind of rental contract. The other issue is what happens when you both need it at the same time? Price sounds reasonable.
I agree with having a contract of some sort. It's always good to have things in writing
I won't need it often, but you're right to consider that. I plan to work it just like a rental place would. I would be responsible for repairs and maintenance except for tires or if it rolled over etc. $20 per machine hour would cover all that. I would not buy any fuel. I agree it will all be in writing. I do need to consider insurance. Maybe it would be cleaner to just send an employee of mine to run it and subcontract on his job. Basically I want to make a little money off if since we both have a need for it but I don't want to go into the full time rental business. Since I trust this guy I'm OK with it. I purchased it for an expansion project at my RV Park. I figure the rental cost for 5 months is about what it cost me to buy it. So when I'm done I'll sell it or if I'm making some money I'll keep renting it out.
You can be added as an additional insured on his lability policy to help protect you liability wise. That's how my other company handles it on the odd occasion we do a rental or rent to own on a machine.
This looks like an excellent use of a "shared use agreement" where the user fee is composed both of capital cost (what it cost you to buy and expected remaining life), responsibility for operational expenses (fuel, oil, routine maintenance) and a proportion of "capital" or major maintenance, things like engine rebuilds. Since this will be a long term agreement, the capital maintenance cost can be based on LAST years costs. While it might take some figuring to come up with the "best" figure, a "fair" figure can be done fairly quickly. For example, if the machine cost 20k and has 20 years expected life remaining, capital cost is 1,000 year or 50 cents an hour. If major maintenance is 5k a year, then it would be $2.50/hour. The rental company rate is fully loaded with all the rental company overhead so it can be a bit high, and their machine gets replaced on a regular basis. Or, you can ask your buddy what he thinks a fair rate would be. Howard
Unless I missed it, if you are renting by the hour with no minimum, specify he pays the transportation there and back.
Good stuff guys, yes he would be picking it up etc. I have 16,500 in it and it has 4600 hours. I figure if I keep it for 1000 hours or so then I'll get $20,000 at $20 per hour. So that will let me use it for my projects , pay for some repairs and pay for the initial cost. I really don't know what the expected life could be. Could this thing last to 10,000 hours? Maybe I'm not giving it enough credit. I know several of the parts have new paint so I suspect they have been rebuilt or replaced at some point in the life of the machine.
Who's insurance covers it if it gets damaged? (rolls off the trailer, truck backs into it, operator error, etc. etc.) Same question for damaged caused by the machine. Who goes running to find parts and make repairs if it breaks down? Who pays for repair labor? If the renter is responsible for repairs, will he do the work properly or limp the machine along and potentially causing further damage to the machine? This should be considered when figuring out the rental rate and terms of rental.
This is a good post and reflects my opinion of renting my equipment even to friend contractors. I decided it just wasn't worth it in the long run and save the useful machine hours for my own work. Just my opinion
DPete beat me too it. What you're describing is a great way to ruin a friendship. If you want to do it, I would establish a daily rental rate with an 8 hour max. on the clock per day and spell out all the details described above in the rental contract.