Release: 1.0
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Welcome to the training on
RENTAL FOR BEGINNERS
What is Rental ?
on their core business
Some Examples
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Rental is the outsourcing of good or services so that companies can concentrate
• • • •
Bookkeeping, cleaning,catering Office machinery ,cars,commercial vehicles Computer systems , logistics Material handling
Why Rental ?
High Capital cost of equipment Lack of know how in providing and maintaining goods or services Predictability for Operational and Financial management Extra services/goods for seasonal business Tax advantages in some countries/regions No risk for disposal of equipment Possibility to change goods/services if the supplier does not perform Equipment upgrades at minimal cost Modern equipment provided
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Reduce headcount / personnel cost (if maintenance is done by the customer)
Where Rental ?
USA UK FRANCE
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outsourcing is the “norm” has generally followed the US model privatisation and sell-off of many government run companies
HOLLAND EAST EUROPE
where logistics are a major part of the economy where Western companies are investing , requiring
fixed price solutions
OTHERS
companies that cannot afford or do not want expensive assets on their balance sheet
Rental Defined
Contract hire/rental/leasing with full service These describe where the customer does not own the equipment . The equipment is not always paid for during the contract life The rental fee covers :
• • Maintenance and repair cost (parts/labour) Capital cost of the equipment
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•
•
Depreciation / finance costs
Profit for the service provider
Non-Rental Products
Hire purchase with or without maintenance The customer becomes the owner of the equipment after a defined period
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Lease agreement with or without maintenance – truck is paid for in a defined
period
The customer does not become the owner of the equipment
Why start with Rental ?
Growing trend in all European countries Profitability is better Constant income for your business Greater ownership of your customer base With Komatsu you have great products for rental
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Rental Calculations Finance Elements
Rental rate Depreciation
• capital cost , residual value
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Finance costs
• capital cost , residual value
Maintenance/repair
Insurance
• capital cost
Overhead costs Profit /Loss
Rental Calculation
Working hours
• single, double , triple shift
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Environment
• clean , foundry , external etc
Usage
• light, normal , hard – check with the customer what he wants to do
Specify the equipment
• • attachments options
Rental Calculation – Maintenance Costs
Made from experience
• Do not complicate !
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Examples given are guidelines
• What will work for one company may not work for another
Costs are less for electric trucks
• Assuming technicians are trained
Consider major attachments
• Clamp (not cabin )
Consider warranty period
• Limited breakdown costs during warranty period
Tyres
• Be clear whether included – usually max.one set per year
Example of Maintenance per hour 2003
Model range BX FD20H - 30H
Application Conditions 0 - 5 Points Light Contract-Months
36 48 60 72 84 36
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Hours/Year
Application Conditions 6 - 10 Points Medium Contract-Months
48 60 72 84 36
Application Conditions 11 - 20 Points Heavy Contract-Months
48 60 72 84
Up to 500 Hours
501-999 Hrs.
1,41
1,60
1,76
1,90
2,01
1,66
1,88
2,07
2,24
2,36
1,99
2,26
2,48
2,68
2,83
1000 Hours
1001-1499 Hrs.
1,37
1,55
1,71
1,85
1,95
1,61
1,83
2,01
2,17
2,29
1,93
2,19
2,41
2,60
2,75
1500 Hours
1501-1999 Hrs.
1,34
1,52
1,67
1,81
1,91
1,58
1,79
1,97
2,13
2,25
1,89
2,15
2,36
2,55
2000 Hours
2001-2499 Hrs.
1,30
1,48
1,62
1,75
1,53
1,74
1,91
2,06
1,83
2,09
2,29
2500 Hours
2501-2999 Hrs.
1,26
1,43
1,57
1,48
1,68
1,85
1,78
2,02
3000 Hours
3001-3500 Hrs.
1,23
1,40
1,45
1,65
1,74
Tyres support Tyres support non-marking
0,39 0,55
0,40 0,56
0,41 0,57
0,41 0,57
0,42 0,59
0,39 0,55
0,40 0,56
0,41 0,57
0,41 0,57
0,42 0,59
0,42 0,59
0,43 0,60
0,43 0,60
0,44 0,62
0,44 0,62
Rental Calculation– 5 year contract
Cost
• € 20.000
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Depreciation
• 72 months
Finance cost
• 5%
Residual value
• € 3.333
Application
• normal , 1000 hrs p.a.
Tyres
• excluded from repair and maintenance
Rate
€ 500 per month
Rental Profitability - €500 Monthly rate
Depreciation
• € 277,78
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Finance
• € 16,67
Maintenance
• € 167,50
Profit
• € 38,05
ROS
• 7,5 %
Rental Profitability - Example
Rental Examples Prudent FD25 Cost Depreciation months Interest Residual value 16,5% Normal application 1000 hours pa Contract months 20000 72 5% 3300 1000 60 Rental Examples Slight Risk FD25 Cost Depreciation months Interest Residual value 28,5% Normal application 1000 hours pa Contract months 20000 84 5% 5700 1000 60
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Income Depreciation Finance Maintenance-parts Maintenance-labour Cost Profit Return on rental Resale of truck Profit on resale Additional income (damage etc) Return on total contract
500 277,78 16,67 88 80 462,44 37,56 7,5% 8000 4700 1000 26,5%
Income Depreciation Finance Maintenance-parts Maintenance-labour Cost Profit Return on rental Resale of truck Profit on resale Additional income (damage etc) Return on total contract
500 238,10 16,67 88 80 422,76 77,24 15,4% 8000 2300 1000 26,4%
Rental Profitability - Example
Rental Examples Slight Risk , but Clever FD25 Cost Depreciation months Interest Residual value 28,5% Normal application 1000 hours pa Contract months 20500 84 5% 5850 1000 60 Rental Examples Attention !! FD25 Cost Depreciation months Interest Residual value 44,4% Normal application 1000 hours pa Contract months 20000 108 5% 8889 1000 60
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Income Depreciation Finance Maintenance-parts Maintenance-labour Cost Profit Return on rental Resale of truck Profit on resale Additional income (damage etc) Return on total contract
500 244,05 17,08 44 80 385,13 114,87 23,0% 8000 2150 1000 33,5%
Income Depreciation Finance Maintenance-parts Maintenance-labour Cost Profit Return on rental Resale of truck Profit on resale Additional income (damage etc) Return on total contract
300 185,19 16,67 88 80 369,85 -69,85 -23,3% 8000 -889 1000 -22,7%
Residual Value – www.lettura.de
Komatsu FD25 6 years old, 5000 hours
Rental calculation
• € 3.333
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Schwackerliste (Germany) 2001/2002
• € 6.230 (buy)
Schwackerliste (Germany) 2001/2002
• € 9.490 (sell)
Used Forktruck Trade Prices
FD30 , 5000 hours , good condition , FV3300 , sideshift
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Manufacturer € Komatsu Caterpillar Linde Toyota Hyster Mitsubishi Nissan Jungheinrich Still OM Pimespo
1996 € 2757 2454 2515 2432 2348 2186 2075 1993 1970 1526
1998 € 4207 3988 4503 4243 3980 3871 3823 3699 3669 3560
2002 6752 6918 6656 6164 6153 6055 5875 5454 5551 5422
Source : argus-chariot.com on the 18.10.04
Used Forktruck Trade Prices
FB15 3 wheel , TFV4.3,S/S, battery charger,1000 hours
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Manufacturer € Komatsu Linde Still OM Pimespo Jungheinrich Toyota Nissan Hyster
1996 € 2137 1931 1897 1062 1892 1639 1677 1635
1998 € 3944 3766 3609 2506 3300 3318 3274 3024
2002 9097 8884 8892 8831 8745 8614 8557 8331
Source : argus-chariot.com on the 25.10.04
Schwacke Examples - Purchase
from 2001/2002
Linde Toyota Komatsu,TCM,Nissan,Mitsubishi Caterpillar Daewoo OM Pimespo Cesab Patria / Halla
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FD25 , 4-5 years old, 5000 hours
€ 11.500 € 9.000 € 7.000 € 5.500 € 5.500 € 4.700 € 3.300 € 2.500
Schwacke Examples - Sales
from 2001/2002 FD25
Linde Toyota Komatsu,TCM,Nissan,Mitsubishi Caterpillar Daewoo OM Pimespo Cesab Patria / Halla
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,
4-5 years old, 5000 hours
€ 17.000 € 13.000 € 11.000 € 9.000 € 8.000 € 7.000 € 5.000 € 3.000
Variables
Travel distance for your technicians How many trucks each technician maintains Parts not in stock Special equipment
• • bale clamps explosion proof
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•
cabins
Change in operating environment
Maximise Profitability
Specify the correct equipment Specify reliable equipment Specify equipment with good re-sales value Well trained and managed technicians Correct preventative maintenance Fit correct parts Manage the customer , manage the renewal Manage the fleet – optimise % utilisation
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Contract Finance
Purchase directly
• Asset is on balance sheet , rental company can change the equipment easily
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Leasing or Finance House
• Finance House can invoice the rental company or the end-user directly
Use existing assets
• Making the “assets sweat” ! Re-use ex-rental contract equipment
Type of Rental Contract
Short term / casual hire
• rental without fixed term–can be terminated at short notice
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Fixed term/fixed price
• 1 day to 5+ years . Penalties may apply for early termination
Fixed term which increase yearly
• example inflation linked
Rental contracts by the hour
• Check of hourmeter counter
Buy-back , re-hire contracts
• equipment is purchased from the customer , then rented back to him
Rental Contract Content
Maintenance / Repair
• included or excluded ?
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Maintenance/Repair
• if included , some items may be excluded (example – tyres)
Customer damage
• charged during or at the end of contract . Often a point of dispute !
Excess working hours Break clauses
• 5 years with 3 year break
Notice period
• can be one day or 6 months !
Service guarantees
• 4 hour response , 12 hour repair , replacement truck etc
Transport costs
Contract Example – Rental by Dealer
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Contract Example – Rental by Leasing Co
Dealer
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How to lose money !
Incorrect equipment
• specification or reliability
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Poor parts availability Unrealistic resale value planned Ineffective technicians Maintenance not done
• breakdowns = costs
Poor quality parts
• increase breakdown frequency, reduce resale value
Customer damage not being identified Poor fleet management
• Poor cost management on repair , less than 90% utilisation for total rental fleet
How to sell Rental
Rental is a service not a product What does the customer need for his business ?
• • • • • Solution for cash flow and variable costs Look for other specialists in outsourcing Reduce personnel costs and headcount Enforce the quality and resale value of Komatsu Use other examples – cars , coffee machines
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Explain why a rental company can manage trucks cheaper and make money ! Explore fiscal advantages in your country Learn to speak to Financial Managers
• Off balance sheet accounting , discounted cash flow
Health and Safety concerns are taken away !
Focus on money back guarantee for failing to provide your contractual service !
How to start Rental
Talk to your existing customers
• consider a leaseback with existing equipment
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Employ a salesperson experienced in rental
Develop your own rental contracts
• use legal advice
Test the market with your own calculations
Use the experience of J-L.Vincent for one free visit to examine with you the
potential of your business
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Thank you and Good Luck !
Komatsu Division 27.10.04