As planting season begins, some farmers may lend their equipment to neighbors or friends. However, owners often wonder how to charge for their use of equipment. The owner typically wants to recover the expenses associated with additional use and may want to keep rates competitive with the renter's other options, such as renting equipment from a dealership.
Owners should consult custom rates before setting a rental fee. Custom rates include charges for repairs, depreciation, taxes, insurance, fuel and lubricants, supplies and labor. Custom rates also include a return to investment, management and risk. A rental rate should be adjusted to
reflect what the neighbor furnishes, like labor and fuel. The renter also may provide the power unit.
University of Nebraska Cooperative Extension periodically completes a survey of custom rates. The published charts show the average, most common and range of rental rates for a piece of equipment within a geographic area.
When this happens, owners should establish a rental rate that covers the costs of fuel, oil and routine maintenance proportional to the number of hours the renter uses the equipment. Owners are responsible for major repairs unless the renter's negligence caused the need for repair.
Some owners include a flat repair cost in their rental fees, which covers routine maintenance and major repairs. If owners use this approach, they must pay for repairs even if the breakdown occurs while the renter uses the equipment. To calculate a flat repair charge, estimate the cost of
repairs over the equipment's lifetime and divide by the total hours of lifetime use to get the average hourly repair cost. Then multiply the cost by the number of hours the renter uses the equipment.
Owners and renters must decide how to cover annual costs, such as taxes, insurance and interest on investment. Experts recommend owners and renters split these costs, which should be proportional to the amount of time each party uses the equipment. Owners may include annual costs in the renter's fee or handle them separately.
Rate guides are reported in extension publications EC823, "Nebraska Farm Custom Rates - Part I" and EC826, "Nebraska Farm Custom Rates – Part II," available at the University of Nebraska Cooperative Extension office in Dodge County.
Dave Varner is an Extension Educator with the University of Nebraska Cooperative Extension office in Dodge County. Dave can be contacted by mail at 1206 W. 23rd St. Fremont, NE 68025; by phone at 402-727-2775; or via e-mail at dvarner1@unl.edu
