The nvisin tool built around this: Rental Manager.
How it is calculated
Dollar utilization = annual rental revenue / original cost of the fleet × 100
For a single month, multiply that month's rental revenue by 12 first. Use what the units cost when you bought them, not their depreciated value, so the figure doesn't improve just because the fleet gets older.
How it is used
Two types can be equally busy and earn very different returns. A cheap unit that rents at a good rate can return its cost in a year, while an expensive one at the same utilization takes several. Dollar utilization puts every type on the same scale, so it helps decide what to buy more of, what to re-price and what to sell. Rental companies often compare it against their cost of financing and running the fleet. The higher it is, the faster equipment pays for itself. The free rental utilization calculator shows it for each type, with months to pay back a unit.
Worked example
| Type | Fleet cost | Monthly revenue | Annualized | Dollar utilization |
|---|---|---|---|---|
| Plate compactors (10) | $24,000 | $2,700 | $32,400 | 135% |
| Mini excavators (3) | $165,000 | $9,900 | $118,800 | 72% |
The excavators bring in far more money, but each dollar spent on compactors earns almost twice as much. Before buying a fourth excavator, it's worth checking whether its rate covers the extra cost and maintenance.
Common mistakes
- Using book value. Depreciated values shrink each year and make an ageing fleet look better.
- Counting delivery fees and damage charges as rental revenue. Keep the rent itself separate so the figure compares like with like.
- Reading it without running costs. A type with high dollar utilization and heavy repairs can still earn less than it seems. Track costs per unit too.
- Annualizing a seasonal month. One busy month times 12 overstates the year. Use the last twelve months when you have them.
Related terms
- Rental utilization rate: A rental utilization rate is the share of your fleet that is out on rent, either right now or on average over a period.
- Trailing twelve months (TTM): Trailing twelve months (TTM) is the total of a figure, such as revenue or net income, for the most recent 12 consecutive months.
- Gross margin: Gross margin is revenue minus the cost of goods sold (COGS), shown as a percentage of revenue.
Further reading
- Rental Manager: the nvisin tool built around this