Deciding Whether to Buy, Lease or Rent a Forklift

There's no getting around the fact that material handling and distribution center warehouse equipment is expensive. When an owner invests money into material handling equipment, they expect to see a good return on investment (ROI) in the form of increased productivity and efficiency that boosts the bottom line and helps pay for that equipment. With a wide variety of material handling and DC warehouse equipment available, there seems to be something for every application. Of course, the more bells and whistles, the more money! So, how do you decide if buying, renting or leasing material handling equipment - such as a forklift - is right for you? Let's break down some of the important factors to take into consideration beforehand.  

Renting a Forklift 

Although renting anything has gotten a bad reputation (good money after bad, money down the toilet, etc), there are many occasions when renting a forklift makes more sense than buying one. Here are some good reasons to choose renting over purchasing:

• You are just starting out - When material handling companies are new, there are more important things to sink your capital into than buying expensive equipment. Yes, hopefully, you are going to need some material handling equipment sooner rather than later, but first you have to get the business into the doors and that takes things like advertising and marketing. Word of mouth is wonderful, but you'll likely need more than that to bring exposure to your business. You might need your capital to lease a space and hire workers. Holding off on making a large, expensive forklift purchase and renting as needed is a better way to get started.

• Having the right equipment for the job - This relates back to the topic above because your material handling company may find itself doing a variety of jobs - at first and into the tenure of your company. Since forklifts - and other material handling equipment - are so expensive, sometimes it just makes sense to rent a forklift for a specific job, rather than buy one that may sit idle for long stretches of time.

• Your business is seasonal - If your material handling or DC warehouse sees a large uptick right before the holidays or right before summer, you'll need to boost your fleet with some additional equipment during those times if you want to keep up and stay competitive. It just makes more sense to rent as needed rather than have forklifts and other equipment sitting around for months.

• No maintenance costs - When you rent a forklift, someone else takes care of the routine maintenance and the cost of repairs if the equipment breaks down. The last thing anybody needs is downtime, so it's nice to know that your material handling equipment rental dealer has your back and you won't be on the line for expensive repairs.

• Factoring the rental price into the job bid - Of course, your company will factor your expenses into each job bid and that includes taking into account the long-term costs of purchasing equipment. However, with rental equipment, you can simply put the daily cost of renting into your bid as a line item without needing complex accounting to determine what this particular job may cost you in terms of equipment life.

• Kicking the tires - And finally, one of the best reasons around for renting a forklift or other piece of material handling equipment. You get to try it out and see if it fits your specific application. Does it live up to its reputation? How easy is it to use? Is the gas mileage or battery power as good as they say it is? Trying before buying makes perfect sense in the material handling and DC warehouse arena.

Deciding to rent a forklift comes with many benefits and there are times when it just makes more sense. Depending on your situation, renting might be the best choice for you. If you aren't sure, there's always the leasing option. 

Leasing a Forklift 

Leasing a forklift is similar to renting one, but there are a few key differences. For many, the reasons for renting listed above will also apply to a forklift lease, but leasing brings some benefits, including:

• Purchasing the forklift at a discounted rate - The forklift is now a used forklift, since you've had it under a lease agreement, but you may be able to purchase it at a better price than what you may pay for a similar used forklift. For those who have found that the forklift serves their purpose well and should do so for an extended time in the future, purchasing a lease can be a good option.

• Building equity - Leasing a forklift can lead to equity you can use for whatever you want, including purchasing the forklift. Equity is only in place when the forklift is worth more than you would owe if you bought the forklift after a lease agreement.

• Reduced cost to company - Dealers anticipate that a forklift lease may result in a sale, so your company might get a better rate than you would for a rental. However, in many cases, there is a penalty if the equipment is returned before the lease expires.

• The ability to trade your leased equipment in for a newer model.

• Taxes - Companies can write off leases as an expense.

Leasing a forklift or other material handling equipment comes with some benefits that are worth exploring. Deciding to lease a forklift rather than rent is a determination that is best made with an eye to the future. In the long run, renting or leasing a forklift or other material handling equipment happens under certain circumstances. 

Purchasing a Forklift 

 Unless your material handling or DC warehouse business is stagnant - and you are OK with that - there's going to come a time when purchasing your forklifts and other fleet equipment makes more sense than renting and/or leasing. If you want to see ROI, you'll need to invest. There are many benefits to purchasing your forklifts, including:

• Reduced overall cost - Probably one of the biggest reasons to purchase a forklift, or other material handling equipment, is the smaller hit to your bottom line. Granted, you'll be costing the company less if you are renting for short amounts of time, but in the overall scheme, if you are using a forklift daily for an extended period of time, purchasing will be less expensive than renting. It's something to take into consideration if you will be using the forklift every day for the foreseeable future. You'll also be responsible for the maintenance and repairs to that equipment, so be sure and take that into consideration, as well.

• Tax incentives - Aside from Section 179 of the IRS tax code which allows smaller companies to deduct up to the full purchase price of equipment, there are other beneficial tax reasons, such as depreciation, to take into consideration.

• Sell or trade in - Since you own the forklift, you can sell it or trade it in when it's time to upgrade - or for any other reason. It's yours, you own it, so you can do with it what you want, including modifying it, if necessary.

• You get what you want and need - Sometimes with renting or leasing, you are confined to using whatever stock the dealer has on hand. When you buy, you get to order the exact forklift you need for your company.

Because material handling and DC warehouse equipment is a large financial investment, as a business owner you need to decide on the best course of action for acquiring your forklifts and other fleet inventory. There may be times when renting is the best option. Similarly, there will be times when purchasing makes more sense.