Call Us At 530-545-8855 For A Free Confidential Consultation
Maximize the Value of Your Rental Business with Rental Business Advisors

A leading boutique M&A and Valuation advisory firm with over 35 years rental industry specific experience

Just in case you don’t know or were afraid to ask what “Cap-ex” means, it is a shortened version (ie: texting/tweeting) for “Capital Expenditures.”  This boils down to “What type and how much equipment are we going to buy next as a rental company?

As rental companies, large and small alike, age their rental fleets in today’s economy, Cap Ex decisions are always a “zero sum game” in the long run in our opinion.  It is a “Pay me now or Pay me later” issue.   Here’s why:

In order to maintain an overall rental fleet age of 5 years or less—which is and always will be an industry benchmark–a rental company must purchase 10% of its overall rental  fleet value EVERY YEAR, year over year.  Here’s how the math works:

Let’s say you have a rental fleet with an original cost/value of $1 Million dollars (or $10 Million or $100 Million–the numbers will work out the same.).  10% of your $1 Million (or whatever your fleet cost number is) in fleet is $100,000.  You therefore must purchase $100,000 in fleet per year to maintain a 5 year average age old fleet.

Part of the equation is that you would also sell off $100,000 per year in ORIGINAL cost of fleet as well.  You won’t get $100,000 for selling this used equipment  but what you are looking at is the original cost of the fleet you sell (usually the oldest units of your fleet).

The equation:

  • $1 Million in ORIGINAL cost of fleet
  • 10% of that fleet equals $100,000
  • After 5 years of Buying new fleet AND Selling off old equipment at a 10% clip (all at original cost) per year yields the following:
  • Half of your fleet will be 5 Years Old or Newer and half of your fleet will be 5 Years Old or Older over time.
  • That equates to an Average Age of Fleet (based on overall dollar expenditures) of 5 Years!

This equation does not take into account any “Growth” CapEX, which would be additional expenditures (or less divestitures) to grow your revenues with increased fleet to over the $1 Million example.

The bottom line is this: Continue to invest in your rental company’s rental fleet or pay the price later with additional repair and maintenance expense or potentially lose out to those rental companies that have a newer and more desirable rental fleet.  It is our strong opinion that any rental company’s fleet age should be 5 years old or NEWER to survive, thrive and succeed long term in this industry!



Call Fred Hageman at

 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

All conversations are confidential and we look forward to working with you to improve your business and maximize its value, no matter when you might sell.


 ARA new 150                    cra logo