What Happens when a Customer Returns Damaged Rental Equipment?

Faith Kubicki

Rental equipment occasionally gets damaged. It’s just the nature of our industry. However, you don’t have to constantly absorb the cost of repairing and replacing damaged equipment. Consistent policies can protect your bottom line, while also protecting your customers from paying for damage that wasn’t their fault.

Get Your Plan in Place 

The worst time to figure out how you’re going to deal with damaged equipment?

When it’s sitting right in front of you.

Putting a plan in place before you’re dealing with a broken machine helps you stay straightforward, unemotional, and consistent.

It also gives you time to train your team on what’s expected – not just at the time of the initial rental, but at the time damage is identified and throughout the process of resolving the issue with the customer. This helps you de-escalate stressful situations and maintain your customer relationships – even in the face of unexpected damage.

So: let’s get to the bottom of it. Jeff Loomis, InTempo’s Director of Development, shares his recommendations for dealing with customer-damaged rental equipment.

First and Foremost: Document the Damage

As soon as you notice damage – whether you’re picking a machine up from the customer’s jobsite or inspecting it in your yard – put it in writing. Note the location and the extent in as much detail as possible.

Whether you’re using paper-based inspection forms or electronic checklists, make sure you have a fail-safe process for managing the documentation. Loose paperwork can get lost or thrown away in an instant; electronic word documents can be stored on a random desktop location that makes them difficult to find when they’re needed in the future. Making sure your damage reports are automatically added to a central repository at the time of completion can reduce the chances of the form being lost or forgotten.

More importantly than just documenting the damage: capture it in photos.

Customers can dispute hand-written notes in a never-ending game of “he said, she said”. Photographic evidence with a time stamp and geolocation tag, however, leaves little room for debate. The customer can’t argue that the photo was taken before the machine left the yard or as it was being wrenched up on the delivery truck.

If you can prove that damage wasn’t present when the equipment left your possession, it’s up to the customer to explain how it got there while it was in theirs.

This process also helps protect customers from being held liable for damage they didn’t cause. If photos show that the problem was already there when they received the machine, you have a reliable paper trail that keeps the right customer accountable.

Distinguish Between Misuse/Neglect and Normal Wear and Tear

As a rule of thumb, it’s not worth holding customers liable for small scuffs or scratches, surface dings, or other normal wear and tear. Major damage, however, can quickly cut into your bottom line – especially considering the rising cost of both parts and labor. A warranty or insurance claim may cover the cost of a malfunction or an accident, but you’ll need to work directly with the customer if the damage was caused by operator error or neglect.

Refer to the Damage Clause in Your Rental Contract (And/or Your Damage Waiver)

Your rental contract (specifically, the damage clause and damage waiver, if applicable) serves as the final word on the customer’s obligations. The language will outline when the customer becomes responsible for the equipment and their specific obligations (e.g., the cost of replacing the unit at fair market value and/or the cost of lost rental revenue while it is down.)

If the damage is covered by the waiver – for instance, if a hydraulic line bursts while the operator is trying to raise a pallet – you can proceed with a warranty claim and the corresponding repair. However, if a machine becomes scratched because the operator was too close to another structure, the cost will fall on the customer.

Of course, it’s important to not just assume that customers read the fine print; your team should verbally confirm the details when finalizing each rental. And, of course, it’s well worth periodically reviewing the language in your contract with a legal professional – especially as your fleet evolves and your business continues to grow.

Keep the Customer Relationship Front and Center

Rental companies (especially independent organizations without rigid corporate mandates) have some flexibility in how they deal with customer-damaged equipment. If it’s one of their best accounts and a small amount of damage, it may be in their best interest to write off the cost of the repair. For instance, replacing a $30 safety sticker that’s missing after a $30,000, six-month rental is a no-brainer. Or, asking the customer to cover a prorated portion of a replacement tire when the original tire was already well-worn may offer a fairer resolution. It doesn’t hold the customer to the fire in an unreasonable way, but it also sets the precedent that damage can’t be ignored.

Communication is key as well. Calling the customer and taking a non-accusatory approach can start the difficult conversation off on the right foot. So can keeping the language “sterile” and framing the issue as a matter of contractual compliance. It’s not so much that the customer did something terrible, but rather, the equipment was damaged while in their possession, and the damage clause in their contract states that they’ll need to cover the cost of the repair. Staying matter-of-fact can reduce defensiveness and get you to a resolution more quickly.

Get the Repair on the Schedule

Getting the equipment repaired is your next order of business. (You may want to make an exception if it’s a machine with low demand and you have a backlog of higher-priority repairs; in those cases, it may make sense to schedule the repair for a later date.)

As soon you’ve completed your equipment damage report, your Service Manager will need to open a work order. If the parts are in stock, they can schedule the repair as soon as a technician is available; if not, they can place an order with the manufacturer and add the work to the schedule as soon as the part arrives.

If the unit has an upcoming reservation and the repair won’t be completed in time, be sure to proactively communicate with the customer. Explore options as early as possible and explore potential solutions, such as transferring a comparable unit from another branch or sub-renting it yourself. Keeping the customer’s job on schedule – or as close to it as possible – helps you deliver the best possible experience.

Deal with the Accounting Implications

Once you and the customer have agreed on the cost of the repair, your Accounts Receivable team can collect payment. Make sure the invoice includes individual line items for the cost of the parts, the cost of the labor, and – if applicable – the cost of lost rental revenue.

If you’ve stored the customer’s card on file, you won’t have to reach back out to get their payment details; you can simply charge a previously used method of payment. Otherwise, you can follow your standard A/R process.

Do most companies have specific GL codes for damage repairs? Is this something we should even mention?

Now That You’ve Got a Plan…Make Sure You Stick to It

No problem, right?

Famous last words…

In a busy rental yard, it’s all too easy for your inspection team to forget to take a picture of a dented side panel or tell your Service Manager that a cracked mirror needs to be replaced. But, for your action plan to make any impact, your team needs to be able to execute it quickly – and consistently – every time they check in a piece of damaged equipment.

That’s where InTempo has your back.

Our Mobile App lets you standardize your inspection checklists and capture damage photos in the yard or at the customer’s jobsite. Service Solution lets you automatically determine where the repair should fall on your priority list based on upcoming reservations and past utilization rates. And, our fully-integrated accounting module lets you easily handle invoicing, general ledger entries, and credit card payments.

Ready to see how we can help you reduce damage disputes, streamline your repair processes, and protect your bottom line? Contact us today for more information or a request a one-on-one demo.

Please consider this your friendly reminder that we are not legal professionals offering legal advice; be sure to consult with your lawyer for tailored advice regarding rental contracts, damage waivers, and dispute proceedings.