Glossary

Rental Rate Multipliers

Rental Rate Multipliers

What are Rental Rate Multipliers?

Rental Rate Multipliers are contractual terms in a rental supplier agreement that are multiplied by the base rental rate to determine the rental rate-connected costs in a rental supplier agreement.

What else should you know?

There are many aspects of a rental agreement, which include these major components:

  • Base Rental Rate
  • Surcharges
  • Taxes

The Rental Rate Multipliers impact the Base Rental Rate.

 

Most people think about the Base Rental Rate the following way. Let’s assume that you’ve rented a scissor lift for one month for $1,000 USD.

Base Rental Rate = $1,000

 

But in reality, this is really the Base Rental Rate formula:

Base Rental Rate = $1,000 X Rental Rate Multiplier

 

Rental Rate Multipliers are stored against expected number of shifts per day and are used to set expectations on how much the equipment will be used.

 

You’ll notice that:

  • One Shift per Day = 1.0 (usage up to 40 hours per week)
  • Two Shifts per Day = 1.5 (usage between 40 and 80 hours per week)
  • Three Shifts per Day = 2.0 (usage above 80 hours per week)

 

The Rental Rate Multipliers you see above represent an industry standard. This is also helpful to keep in mind in case your Rental Supplier has rate multipliers that exceed these standards – protect yourself and negotiate to the benchmarks.

So, going back to the Base Rental Rate calculation, when renting equipment your supplier’s default assumption is that your rental is One Shift per Day. Setting accurate expectations on usage is critical. If usage is set too low in your rental agreement expectations, you may encounter Overhours Billing at the end of the rental agreement.

 

Base Rental Rate, 1 Shift per Day = $1,000 X 1.00 = $1,000

Base Rental Rate, 2 Shifts per Day = $1,000 X 1.50 = $1,500

Base Rental Rate, 3 Shifts per Day = $1,000 X 2.00 = $2,000

 

As you can see above, the Rental Rate Multiplier, which is connected to the expected number of shifts per day utilizing the asset, can greatly impact the actual base rental rate.

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