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December 2017
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Examine applications to settle lift truck lease vs. purchase question
Bill Buckhout

As the economy continues to recover, owners and managers of warehouses and distribution centers may be increasingly considering the acquisition of new equipment to replace outdated technologies or meet increased demand. As a result, they also may be considering lift truck leases to obtain this new equipment.

A lease can make sense for many reasons — it offers a fixed equipment cost, helps companies acquire newer technologies and may provide tax advantages. Leasing companies also may offer more flexible credit requirements than banks in a tight credit market. However, companies should take steps to ensure the lease agreement they enter meets their operational requirements.


Considerations

Leases can be varied to meet a company’s specific needs for equipment use — including different lengths of time and lease-to-own. For example, a capital lease offers ownership benefits without large cashflow for new or used equipment. A fair market value (FMV) or true lease, where the tax benefits of ownership are retained by the leasing company, enables companies to return the equipment, extend the lease or buy the equipment at its fair market value at the end of the lease.

Before investigating a lease for lift trucks, facility owners and managers should examine their operations thoroughly and evaluate how their current fleet of lift trucks is being used, and how new units would be integrated. Presenting those findings to a trusted lift truck dealer can help determine which type of lease makes the most sense — or whether a lease is even the best option. The dealer also can help companies evaluate their applications and lift truck usage, and may be able to suggest different options for the mix of lift trucks in a fleet to aid cost-efficiency and productivity.

A facility with good information about its equipment utilization can typically forecast the useful life cycle of a lift truck, making it a good lease candidate because it can spread out equipment cost over the lease term. Plus, a lease extension option can provide flexibility if business conditions or utilization changes, and further use of a lift truck is required at the end of its lease; if not, it can be rotated out of service.

But facilities with infrequent utilization, where a lift truck could remain idle for periods of time, may be better-suited for a longer term lease or equipment purchase. Companies with infrequent use typically can extend the life of a lift truck beyond what would be cost-efficient in a heavy-use facility.

Above all, it is important for warehouse or distribution center owners and managers to be as specific as possible about their facilities’ needs prior to meeting with a lift truck dealer about leasing. This should include discussing the applications for which lift trucks are used, as well as how often they are used and for what length of time. Taking the extra step of surveying both the facility and lift truck fleet will help better define equipment needs and avoid vagueness or nebulous requests during lease discussions that won’t result in a lease that meets the company’s needs. By being thorough and determining what is needed, a facility manager is in a better position to obtain the equipment — and the lease or purchase option — that will best suit a company’s applications.

 

Bill Buckhout is sales and marketing manager for Raymond Leasing Corporation. He is responsible for lease program and customer management, training, sales, originations, and end-of-lease processes. Buckhout has more than 25 years of experience in the material handling industry, including 13 years in captive equipment leasing, dedicated to customizing lease products and equipment usage programs. He has a bachelor’s degree in economics from Calvin College in Grand Rapids, Mich., and a master of social work degree from Grand Valley State University in Grand Rapids.
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