Better Transparency for Equipment Stakeholders
The European Rental Association (ERA) has redesigned and upgraded its free-to-use ‘calculator’ which works out the Total Cost of Ownership (TCO) for equipment.
The tool provides a comparison between the costs of buying and renting of equipment, which now also includes the two models of the lease option – operating lease and financial lease.
The calculator, created in collaboration with the Solvay Brussels Business School of Economics and Management in 2015, was the first of its kind to provide a financial estimate designed to help equipment stakeholders better assess the actual cost of equipment by working out the total economic value of the investment. The online calculator today has well over 1,000 regular users, which are split almost evenly among contractors, end users, rental companies and equipment manufacturers.
The calculator offers a completely unbiased view of Lease vs. Buy vs. Rent (LBR) analysis, to help equipment stakeholders draw comparisons and make informed decisions. The new enhancements mean the equipment TCO tool now includes lease options, both financial and operating, and introduces the risk factors associated to the operation and the management of construction type equipment. The project has been developed with the assistance of financial expert, Jeff Eisenberg, who has spent 18 years in the equipment and rental industry, with further input from equipment stakeholders.
Operating and financial leasing have different costs and risks compared to renting and buying. The refreshed TCO calculator shows which variables have the biggest impact on the calculations. These variables include residual value risk, breakdown and substitution risk and cost, and others, which should get more focus than they do. In addition, the calculator shows the total cashflow of each LBR option, plus the net present value.
The calculator also has a refreshed and improved interface for the tool. The new version now offers a comprehensive overview of all the LBR models, together with parameters that influence the final comparison of TCO in the different options. The tool is available both in a desktop version as well as mobile. Users can save all their calculations inside the tool for future reference.
The new version of the calculator keeps five types of machines for which it provides calculations:
- Wheel loaders > 15 T
- Track loaders > 15 T
- Wheel excavators > 15 T
- Crawler excavators > 15 T
- General construction equipment machines < 15T
Explaining the upgrade, Michel Petitjean, ERA Secretary-General, said:
“ERA is continuously working to provide a comprehensive set of tools for equipment stakeholders to ensure they are making informed decisions. The improvements made to the equipment TCO calculator will allow analysis of how best to obtain access to the right machines. A further step ERA is taking, is to provide a similar tool from an environmental standpoint to quantify the sustainable benefits of equipment rental."