What to Do When a Customer Returns Damaged Rental Equipment: 6 Steps to Take Immediately

If you’ve been in the rental business long enough, you know this moment all too well. A customer drops off a piece of rental equipment, you give it a quick once-over, and—bam—you spot a dent, a cracked panel, or worse, a machine that won’t even start. Maybe they “forgot” to mention it, or maybe they truly had no idea it was damaged. Either way, you’re stuck with a repair bill, a disruption in your rental schedule, and a potential argument over who’s responsible.

So, what now? If you don’t have a clear process in place, these situations can turn into disputes real fast, and that’s the last thing you want. Let’s talk about exactly what you should do when damaged rental equipment comes back to your yard, how to handle it professionally, and—more importantly—how to prevent it from happening in the first place.

Key Takeaways

• Immediate Action: Inspect and document any damage as soon as equipment is returned.
• Clear Communication: Maintain open lines with customers to resolve issues swiftly.
• Preventive Measures: Implement training, maintenance, and clear contracts to minimize damage incidents.
• Leverage ARM Software – ARM’s rental asset management software helps you track equipment, manage damage claims, automate work orders, and streamline customer communication.

6 Steps to Take Immediately

It’s important to have a plan in place for handling damaged rental equipment. This will not only help you handle the situation efficiently and professionally, but it will also protect your business from potential disputes or legal action. Here are six things you should do when equipment damage happens:

1. Inspect the Equipment—Right Away

The moment a customer returns rental equipment, someone on your team—preferably a service manager—should conduct a thorough inspection before the customer even leaves the yard.

Here’s why: If you let the customer drop off the machine, sign a return slip, and drive off without checking it, you’ve just lost your best opportunity to address any issues right then and there. If you call them three hours later to say, “Hey, this skid steer’s hydraulic arm is busted,” they’re just going to say, “Wasn’t me.”

Best practice? Inspect the equipment while the customer is still there. This way, if you spot something, you can discuss it on the spot. If that’s not possible—because let’s be real, sometimes you’re juggling ten things at once—make sure a service manager checks it as soon as it hits the yard.

Tip: Always inspect heavy equipment in good lighting and with a detailed checklist. It’s easy to miss hairline cracks or subtle issues if you’re rushing through the process.

2. Gather Photographic Evidence

I can’t stress this enough: Document everything. Take images from multiple angles—close-ups and wide shots. If the damage occurs on a moving part, get a video of it in action. The more photographic evidence you have, the better.

Why? Because customers will challenge you on damage claims. A few well-timed images can make all the difference between a smooth resolution and an ongoing dispute.

Also, make sure you have before and after pictures for high-value rental equipment. Whether you rent out construction equipment or AV equipment, your higher-end assets are pivotal to your bottom line. If your team isn’t already taking images of machines before they leave the yard, start now. This is your best proof that the damage wasn’t pre-existing.

3. Review the Rental Contract—Know What’s Covered

Your rental contracts should be your safety net. If you’re not sure whether you can charge the customer for the repair, check the contract. It should clearly state:

• Who’s responsible for damage?
• What’s considered normal wear and tear? (Minor scratches? Acceptable. Cracked engine casing? Not so much.)
• Does the customer have a damage waiver?
• How are repair costs calculated?

If your rental contract isn’t clear on these points, fix it—yesterday. A well-written contract protects both you and your customer, making these conversations a whole lot easier. Here’s a breakdown of what to include in your rental agreement.

4. Estimate the Repair Cost—Get It in Writing

Once you’ve identified the damage, bring in your service manager to estimate the repair cost. If it’s minor, your own maintenance team can likely handle it. If it’s major, you may need to send it out. Always get a written repair estimate—especially if the customer is footing the bill. If they question the amount later, you want documented proof of what the repair entails.

Some companies offer replacement cost coverage as part of their rental agreement, which can soften the financial hit for both parties. If your business doesn’t offer this, it might be worth considering.

5. Communicate with the Customer—Be Direct, But Fair

Once you have all your documentation—photographic evidence, inspection reports, and repair estimates—it’s time to talk to the customer.

The key here? Stay professional and stick to the facts. No one likes being told they owe money for equipment damage, and some customers will push back hard.

Here’s a simple, direct way to frame it:

“Hi [Customer Name], during our post-rental inspection, we found damage to the [Equipment Name]. We’ve attached photos and the repair estimate. Based on our rental agreement, you’re responsible for the cost of repairs. Please review and let us know how you’d like to proceed.”

If they argue? Refer back to the contract and your photographic evidence. Stay firm but professional.

6. Send the Invoice and Follow Up

Once you’ve communicated the issue, send an invoice promptly. If they delay paying, follow up at regular intervals. No one likes chasing down payments, but delaying just makes it harder to collect.

If they refuse to pay, consider your options:

• If they have a damage waiver, does it apply?
• If they paid a deposit, can you use it for repairs?
• If they refuse to cooperate, is legal action worth it?

Most of the time, a clear contract and solid documentation prevent things from escalating. But when they do, it helps to have everything in writing.

Check out our blog on rental asset management best practices for more tips.

How to Avoid Damaged Equipment in the First Place

Let’s be honest—damage is part of the rental business. No matter how well you screen customers, how sturdy your equipment is, or how many precautions you take, rental equipment will come back with wear and tear—and sometimes much worse.

But here’s the good news: There are several strategies you can put in place to protect your assets, reduce damage occurrences, and keep your business from eating costly repair bills. The key is to be proactive.

Offer a Damage Waiver – Make It Standard

A damage waiver isn’t just an upsell—it’s a safety net. Think of it like rental car insurance. It’s an optional fee that customers can pay to limit their financial responsibility if damage occurs.

Why is this important?

• It gives the customer peace of mind. They know they won’t be stuck paying the full cost if something happens.
• It ensures your business isn’t left footing expensive repair bills when a customer claims it was “just an accident.”
• It prevents disputes—you’re both covered, and it’s clear from the start how damage will be handled.

Many rental companies charge around 13–15% of the base rental cost for a damage waiver. According to RER Magazine, offering these waivers can offset repair costs and add an extra layer of financial protection for your business.

Train Customers Before They Leave the Yard

One of the most common reasons rental equipment gets damaged? Customers simply don’t know how to use it properly.

Think about it: A contractor rents a skid steer for the first time, assumes they know how it works, then accidentally overloads the bucket and snaps the hydraulic arm. Or someone rents a scissor lift, doesn’t realize how sensitive the controls are, and crashes it into a wall.

That’s why a quick training session before they leave with the equipment can save you a repair bill later.

• Walk them through basic operation and safety tips.
• Show them how to start, stop, and shut down properly.
• Make sure they know how to handle common issues—like what to do if a warning light comes on.
• Have them sign off that they’ve been trained (so they can’t claim later that they didn’t know what they were doing).

Not every rental requires this, but for heavy equipment, lifts, or anything with an engine, it’s a simple way to prevent unnecessary damage.

Inspect Equipment Before Every Rental—And After

If you don’t have a strict inspection process, you’re setting yourself up for trouble. You need to document the condition of every machine before it leaves your yard and right when it comes back.

Before the rental:

✔ Take photographic evidence from multiple angles.
✔ Document any pre-existing damage (scratches, dents, wear).
✔ Check for fluid levels, tire pressure, and safety features.
✔ Have the customer acknowledge the inspection report before they leave.

After the rental:

✔ Perform another inspection immediately when the equipment is returned.
✔ Compare it to the pre-rental inspection report.
✔ If damage occurs, document it with photos and get a repair estimate ASAP.

Having a structured process in place will help prevent disputes when a customer claims, “That was already there when I got it.”

Require Proof of General Liability Insurance

If a customer is renting something expensive or operating heavy equipment on a job site, you should require them to provide proof of general liability insurance before they take the unit.

Why? Because accidents happen. If someone backs a rental truck into a building, or a loader overturns on a job site, you want to be sure you’re covered.

Many rental companies have a minimum insurance requirement for customers, especially for high-value assets. If your business doesn’t have this policy, it’s worth implementing.

Use GPS and Telematics to Track Equipment Usage

Technology is your friend. Installing GPS tracking and telematics systems on high-value rental equipment can help you:

• Track where your equipment is in real time.
• Monitor how it’s being used (harsh braking, overload warnings, excessive idle time).
• Detect potential damage before it gets worse (engine warnings, overheating alerts).

If a customer is abusing a machine, you’ll know about it before they return it in pieces. Some rental companies even charge fees for excessive misuse based on telematics data.

For more on how technology helps with rental asset management, check out this guide on mobile asset management in rentals.

Set Up a Preventative Maintenance Schedule

A well-maintained machine is a reliable one. Regular maintenance improves your utilization rate and reduces the chances of equipment failure, and by extension, unnecessary damage.

At a minimum, schedule:

• Routine oil changes and fluid checks
• Brake and hydraulic inspections
• Tire rotations and replacements for heavy equipment
• Electrical system tests

Make sure your team logs every maintenance session in your system. ARM Software makes it easy to track service history, so you always know when a unit was last serviced and what was done.

How ARM Software Helps You Handle Damaged Rental Equipment Efficiently

When a customer returns damaged rental equipment, the last thing you want is to waste time digging through paperwork, chasing down repair estimates, or arguing over damage disputes. ARM Software is built to help rental companies stay ahead of these issues by streamlining documentation, tracking, and customer communication—so you can focus on keeping your business running smoothly.

Here’s how ARM’s rental asset management software makes a difference:

Track Equipment Condition from Start to Finish

With ARM, you can document equipment condition at every stage—before it leaves your yard, when it’s out on a job site, and the moment it comes back. Instead of relying on handwritten notes or scattered photos on employees’ phones, everything is stored in one system. This makes it so that you always have a clear record of damage, inspection history, and repair needs.

Automate Damage Documentation & Work Orders

When damage occurs, you need a work order in place—fast. ARM’s software automatically logs damage reports, assigns work orders to your service manager, and keeps everything documented in one place. No more lost paperwork or miscommunication between your team members.

Improve Customer Communication & Dispute Resolution

ARM Software helps rental companies manage customer disputes by centralizing service records, maintenance logs, and related documentation. While ARM simplifies dispute resolution by giving you easy access to rental history and damage reports, integrating photographic evidence and contract details into this process depends on your current documentation workflow.

Invoice Customers for Repairs Instantly

Once the damage is assessed, you need to bill the customer quickly. ARM Software makes it easy to generate repair invoices, attach repair estimates, and send them directly to the customer. This speeds up the payment process and helps you avoid unnecessary delays in covering repair costs.

Maintain Rental Asset Utilization & Revenue

Every day a piece of rental equipment sits in the shop waiting for repairs, you’re losing revenue. ARM Software helps you keep track of which units are down, what repairs are needed, and how long they’ll take—so you can get your equipment back out for rent as soon as possible.

Conclusion on Damanged Rental Equipment

Dealing with damaged rental equipment is never fun, but it’s part of running a rental business. The key is having a process in place so you’re not scrambling every time a customer returns a piece of equipment with a broken part, a dented frame, or worse—something that won’t even turn on.

By taking immediate action when damage occurs, documenting everything with photographic evidence, and enforcing the terms of your rental contracts, you can minimize disputes and recover repair costs faster. But the real game-changer? Prevention. Offering a damage waiver, training customers on proper use, staying on top of maintenance, and using rental asset management software like ARM can help you protect your fleet and keep your rental business running smoothly.

Frequently Asked Questions