Whether you’re in the market for your first lift truck or your 50th, you’ve likely wrestled with the question of “should I buy or lease a forklift?”. While both are viable options, it’s important to properly assess the benefits of leasing versus purchasing a forklift to help protect your bottom line.
When buying a forklift makes sense
Cash purchases with funds from working capital have a big advantage — it’s normally the lowest cost method of acquiring forklifts. You get immediate ownership and have no service fees, finance charges or interest expense. Owned forklifts go on the company’s balance sheet and are subject to depreciation methods for taxes. When you’re finished with the forklifts, you can sell or trade them in toward replacement units.
If your company prefers to own your equipment, and you only utilize forklifts for limited, undemanding tasks, owning and keeping lift trucks for a long time may be the way to go.
Two other scenarios that can make buying a forklift a better option than leasing a forklift:
- Your application requires custom features and special attachments — leasing companies don’t always have a ready market for such forklifts at the end of the lease and may be reluctant to write leases for the forklifts.
- You often move forklifts between facilities — most lease clauses limit equipment to one location.
The potential downsides of buying a forklift
There can be two negatives for outright purchases:
- Cash is depleted by the purchase. Your company may need this cash elsewhere to grow the business or for other goals.
- A purchase converts your fluid cash into a fixed asset. This can weaken your company’s financial statistics. Banks or investors can view this negatively.
Leasing forklifts has its pluses
If your forklifts are at work almost the entire shift of each working day, leasing forklifts can be the way to go. Here’s why:
- Because the lease is written for a set period, leasing encourages a more orderly planned equipment replacement cycle.
- Leasing can give your company much needed flexibility. Leases can be written to upgrade forklift models if your material handling needs change or if new technology advances help improve productivity. If you need the forklift to fulfill a customer contract, lease duration can match the contract’s time period.
- Leases allow you to tie a maintenance and repair program into the arrangement. This can take worries off your shoulders so you can concentrate on efficiency and moving more product.
- Leasing turns a capital expenditure into small monthly payments — a fixed cost that can be allocated to the proper department. This simplifies bookkeeping, reduces paperwork and makes budgeting for future priorities easier. Leasing also allows you to preserve the company’s lines of credit for other business needs, and payments are a tax-deductible expense.
The downsides of a forklift lease
A sticking point for many businesses when it comes to a forklifts lease vs. buying can be the overall cost. When you add in interest costs over a longer time period, you will often pay a higher price than if you purchased your forklifts up-front with cash.
As leases also come with fixed-time periods, you may run into the issue of being stuck with equipment or forklifts that you no longer need. Also, you could find yourself with a lease that doesn’t fit your business and you may wind up seeing additional expenses for overtime or abuse charges. This is why it’s best to set up a lease with the advice of a knowledgeable resource like your local forklift dealer. Together, you will review your application and decide on the proper number of lift trucks for the fleet and an ideal replacement time. One major benefit is that you’ll get new trucks before maintenance costs pile up.
Some companies have forklift lease to own or rent to own programs. The terms and conditions of each program will vary, but most provide flexibility for those who are interested in purchasing particular forklift models but would like to try them out first for a specific period of time.
If you’d like to learn more about various leasing and finance options contact your local forklift dealer for further assistance.