Rent Smart: Cat Rental Stores

Now celebrating its 10th anniversary, Cat Rental Stores have grown from 65 locations at the end of 1998 to 1,429 locations worldwide this year, with expectations to grow to 2,000 stores by 2010. Combined dealer rental volume exceeded $4 billion in 2007, and Cat dealer Thompson Machinery opened the 500th store in North America this March in Biloxi, Mississippi.

“We think rental is an absolutely necessary business,” says James W. Johnson, general manager, Caterpillar Global Rental and Used Equipment, noting that Caterpillar dealers Wagner Equipment in Colorado and Hawthorne in California led the company’s initial rental efforts.

Caterpillar has a dual rental strategy. Caterpillar dealerships usually take care of long-term rentals, especially of larger machines. Cat Rental Stores handle short-term rentals of smaller Caterpillar equipment (around D5-size and smaller) and allied equipment, such as aerial lifts. “From a small equipment business perspective, we also think it makes sense to sell and service machines from our rental stores,” Johnson says.

With an average fleet age of 19 months in 2007, Caterpillar has the youngest fleet in the industry, Johnson says. “It’s absolutely essential we have the right mix of Caterpillar and non-Caterpillar products in our rental fleet,” he comments. “We want to get the message out that our customers can rent a full variety of equipment at our stores.” The typical percentage of non-Cat equipment in a Cat Rental Store is usually between 20 to 30 percent.

According to Johnson, Caterpillar dealers are making plans to aggressively grow Cat Rental Stores globally. The current dealer forecast calls for at least 70 new stores in North America and about 200 additional stores in Europe. The remaining stores will be distributed between Australia, China, New Zealand, Southeast Asia and Latin America.

“We opened the first store years ago to promote compact equipment and this area has grown with customer demand for rental,” Johnson says. “Customers are getting smarter about their return on assets – even in areas where owning is traditionally preferred.”

For instance, Cat Rental Stores have seen rental demand pick up in areas such as Asia and Latin America, which Johnson says were originally biased toward owning equipment.

One other way Caterpillar may expand its rental presence: At the recent ConExpo-Con/Agg, the rental group announced it is examining the possibility of a partnership with Home Depot stores. “We’re trying to reach general contractors who want to rent smaller equipment,” Johnson says.

Caterpillar has been running a pilot rental store at a Home Depot in Dallas, Texas, since November 2007, but declined to elaborate on the pilot’s progress thus far.

The Cat Rental Stores attempted a similar pilot last year with Cashbuild, a do-it-yourself center based in South Africa. “That pilot attracted more homeowners instead of small contractors, which really wasn’t what we were going after,” Johnson explained.

Caterpillar will continue to monitor the Dallas pilot to determine whether to go forward with the Home Depot venture or open additional pilot stores for more research.

Rental Briefs
Ahern Rentals enters agreement with Custom Equipment

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Sunbelt Rentals opens two new Midwest locations
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Sunbelt Rentals offers general construction and industrial equipment, and also serves the pump, power, trench shoring and scaffold markets.