Two firms on the same industrial estate hire out the same 6-metre scissor lift. One charges 40 a day, the other 95. The cheaper one is losing money on every hire and does not know it, because the machine only leaves the yard six days a month.
That gap is not a market. It is arithmetic that one of them has done and the other has not.
To price rental equipment, work out what each asset must earn per month to pay for itself, divide that by the number of days you realistically expect to hire it, and add your margin. The formula is:
Day rate = (monthly recovery + running costs) × (1 + margin) ÷ expected hire days per month
Everything else — weekly rates, monthly rates, deposits, delivery — follows from that one number. This article walks through the method with a full worked example, and shows why the most common approach, copying the firm down the road, quietly loses money.
What is the quickest way to set a rental rate?
If you want a starting point in two minutes:
- Take what the asset cost you.
- Decide how many months you want it to pay itself back in. Two to three years is a common target for durable equipment.
- Divide one by the other. That is your monthly recovery.
- Add monthly running costs — servicing, insurance, storage, the share of your overhead it carries.
- Add your margin.
- Divide by the number of days a month you actually expect it out on hire.
That last step is where most rental businesses go wrong, and it is the one worth reading the rest of this for.
Why copying your competitor’s rates fails
It is the obvious move: ring around, see what everyone charges for a 6-metre scissor lift, land somewhere in the middle. It feels safe. It is not, for three reasons.
You do not know what they paid. A competitor who bought the same machine second-hand at half your price can charge 30% less and still make a better margin than you. Matching their rate copies their pricing without copying their cost base.
You do not know their utilisation. A firm that hires a machine 22 days a month can afford a day rate that would bankrupt a firm that hires it eight. Same machine, same market, completely different correct price.
You do not know what they include. If their rate includes delivery and yours does not, you are not the cheaper option — you are the one with a nasty surprise on the invoice.
Copying rates only works if you have copied the whole business. Since you have not, do the arithmetic instead. It takes an afternoon per category and it is the highest-paid afternoon most rental owners will have that year.
Step 1: What does the asset actually need to earn?
Start with the asset, not the market. Three numbers:
Purchase cost. What you paid, including delivery and any commissioning. If you financed it, use the cash price here and treat the finance cost as a running cost below.
Payback period. How long before it has paid for itself. This is a decision, not a fact. Shorter means higher rates and more pressure to keep it busy; longer means softer rates and more exposure if the asset ages badly or the market turns. Two to three years suits most durable equipment. Set it shorter for anything that dates quickly — consumer electronics, anything with a battery.
Running costs. Per month, for that asset: servicing and parts, insurance, storage or yard space, finance interest if you borrowed, and a fair share of your general overhead. Most owners underestimate this badly. If you have never split overhead by asset, a rough method is to take your total annual overhead, divide by the number of assets, and refine later.
Keep the numbers on the asset, not in your head
Purchase price, purchase date, warranty and service history belong on the asset record, so the person setting rates is looking at real figures rather than recalling them. In Rentablez this lives on the unit itself — see inventory and asset records.
Step 2: Be honest about utilisation
Utilisation is the share of available time an asset is actually out earning. It is the single number that decides your rates, and almost everyone overestimates it.
Here is the uncomfortable arithmetic. Take an asset that must earn 840 a month to hit its target:
| If it is hired | That is roughly | Each hire day must earn |
|---|---|---|
| 26 days a month | 87% utilisation | 32 |
| 20 days a month | 67% utilisation | 42 |
| 15 days a month | 50% utilisation | 56 |
| 10 days a month | 33% utilisation | 84 |
| 6 days a month | 20% utilisation | 140 |
Same asset. Same target. The correct day rate varies by more than four times depending on nothing but how busy it is.
This is why “what should I charge for a scissor lift?” has no universal answer, and why an operator who is quiet cannot fix it by cutting rates — cutting rates raises the number of days needed to break even, which is the opposite of what a quiet asset needs.
Guess high and you will price low
The instinct is to assume the asset will be busy, which produces a comfortable-looking day rate that never quite covers its costs. If you do not have real figures yet, plan conservatively and revise upward once you do. It is far easier to reduce a rate than to raise one.
Do not guess for long. Utilisation per asset and per category is exactly what a utilisation report is for, and once you have a few months of real hires the guessing stops.
Step 3: One rate is not a price list
A single day rate is not a pricing structure, because a customer taking a machine for a month is not buying thirty of the same thing. They are buying certainty — and giving you something valuable in return, which is guaranteed utilisation.
That is the logic behind the rate ladder. Longer hires earn a lower per-day price because they remove the risk you priced the day rate to cover.
| Duration | Typical shape | Why |
|---|---|---|
| Hourly | Day rate ÷ 4 to ÷ 6, with a minimum | Covers handling, which does not shrink with the hire |
| Daily | The rate from Step 2 | Carries the full utilisation risk |
| Weekly | Around 4 to 5 × the day rate | Seven days of certainty, priced below seven days |
| Monthly | Around 12 to 16 × the day rate | Near-total certainty for that month |
The multiples are a starting shape, not a law — they should fall out of your own utilisation figure. The lower your utilisation, the higher your day rate has to be, and the bigger the gap between daily and monthly becomes.
Two rules keep a ladder honest. Set a minimum hire period, or a two-hour job will cost you a full day of handling for a fraction of a day’s income. And make sure each step is genuinely cheaper per day than the one above it, or customers will book seven single days instead of a week and you will have priced yourself into extra paperwork for the same money.
The slab should be chosen for you
Once a ladder exists, nobody should be picking the tier by hand. Rentablez chooses the slab from the duration actually booked and applies the minimum hire period automatically, so a month is billed at the monthly rate rather than thirty daily ones — see bookings and rates.
Step 4: Price the things that are not rent
Rent is the part everybody prices. The margin usually leaks through everything else.
Deposits. A deposit is not income and should never be treated as such — it is the customer’s money sitting with you against a risk. Size it against what the asset would cost you to repair or replace, not against the hire value. A 200 hire on a 12,000 machine may still justify a substantial deposit.
Delivery and collection. Charge for it separately and charge realistically: a driver, a vehicle and two hours are a real cost whether the hire is one day or ten. Bundling it into the rate means your long hires subsidise your short ones.
Damage, cleaning and late return. Decide these in advance and write them into your terms, because deciding them during an argument always costs you money. A published cleaning charge is a deterrent; an improvised one is a dispute.
Consumables. Fuel, blades, tubes, cable ties. Small individually, and a meaningful line on the year.
All of these need to be on the agreement the customer signed, not in a conversation someone half-remembers — which is what a rental agreement with the terms attached to the order is for, and why charges raised at return should land on the invoice rather than in a follow-up email. Deposits, damage charges and late fees are handled in invoicing and payments.
Step 5: Review against what actually happened
Pricing is not a decision you make once. Every quarter, per category, look at three things:
Revenue per asset. Not total revenue — per asset. It exposes the machine everyone assumes is a workhorse and which has actually been sitting in the corner since March.
Utilisation against your assumption. If you priced at 50% and you are running at 70%, you are leaving money on the table. If you are running at 30%, your rates are too low for how busy you are, which sounds backwards until you re-read Step 2.
Discounting. How often the published rate is actually the rate charged. If your team discounts eight hires in ten, your published price is fiction and should be corrected — or the discretion should be removed.
A full worked example
A 6-metre scissor lift, priced from scratch.
| Input | Value |
|---|---|
| Purchase cost | 12,000 |
| Payback target | 24 months |
| Monthly recovery (12,000 ÷ 24) | 500 |
| Running costs — service, insurance, yard, overhead share | 120 |
| Monthly cost to cover | 620 |
| Target margin | 35% |
| Monthly revenue target (620 × 1.35) | 837, round to 840 |
Now apply utilisation. In this market the owner expects the lift out around 15 days a month:
840 ÷ 15 = 56 per hire day.
That builds the ladder:
| Duration | Rate | Per-day equivalent |
|---|---|---|
| Minimum hire | 1 day | — |
| Daily | 56 | 56 |
| Weekly | 250 | 36 |
| Monthly | 840 | 28 |
Read the right-hand column, because it is the whole argument. A customer taking the lift for a month pays half the per-day price of a customer taking it for one day — and in exchange the owner gets a month of guaranteed utilisation instead of the 50% they assumed. Both sides come out ahead, which is what a good rate ladder does.
A year later the owner checks the reports. The lift actually ran at 68%, about 20 days a month. At 56 a day that is 1,120 a month against a target of 840 — comfortably ahead, and a signal to either buy a second lift or nudge the day rate up, rather than to keep congratulating themselves on a number they set with a guess.
Five mistakes that cost the most
Pricing from the purchase invoice alone. Recovery is the easy half. The running costs are what quietly eat the margin, and they are the half people skip.
Assuming utilisation you have never measured. Covered above, and worth repeating because it is the most expensive error on this list.
One rate for a whole category. A five-year-old machine and last year’s model can share a category and still deserve different rates. Price the asset, not the label.
Free delivery on short hires. The most common invisible loss in the industry. A one-day hire with a two-hour round trip can easily be a loss-making job that looks like revenue.
Never revisiting. Costs move, machines age, markets shift. A price list nobody has looked at in three years is not a strategy, it is a habit.
Frequently asked questions
What percentage of the purchase price should a rental rate be? A common rule of thumb is that the monthly rate should be roughly 3–5% of the purchase price for durable equipment, which implies a payback of roughly two to three years. Treat it as a sanity check on the arithmetic above rather than a substitute for it — it takes no account of your running costs or your utilisation, which are the two things that actually differ between businesses.
How do I price a brand new category I have never rented before? Use the method with a deliberately conservative utilisation assumption, publish the rate, and review it after one quarter with real figures. The first price is a hypothesis; the second one is pricing.
Should weekly rates be exactly seven times the daily rate? No. If a week costs the same as seven days, there is no reason for a customer to commit to a week — and the commitment is precisely what you want, because it removes your utilisation risk. Somewhere around four to five times the day rate is a common shape.
How much deposit should I take on rental equipment? Size it against your exposure, not the hire value: what would it cost to repair or replace the item, and how much of that can you realistically collect afterwards if you have not held anything. Keep it separate from rent in your accounts, because it is not money you have earned.
Should I show my rates publicly on my website? Published rates cost you some negotiating room and save you an enormous amount of time answering the same question. Most small and mid-sized operators are better off publishing, because the enquiries that arrive already understand roughly what things cost.
How often should I change rental rates? Review quarterly, change annually unless costs move sharply. Frequent changes confuse repeat customers and make historical comparison difficult — and the underlying question is usually utilisation, not price.
Pricing is arithmetic, not instinct, and the arithmetic only works if the figures behind it are real. If your utilisation is a feeling rather than a number, that is the thing to fix first — everything in this article depends on it.
Rentablez keeps purchase cost and service history on the asset, applies duration ladders and minimum hire periods automatically, and reports utilisation and revenue per unit so the quarterly review takes an hour instead of a weekend. Book a demo and we will price one of your own categories on the call.