Forklift Lease vs. Forklift Purchase—How to Make the Right Decision

Lease or Buy? Pros & Cons of Signing a Forklift Lease vs. Purchasing

A forklift is a capital item that requires a combination of financial and operational analysis before making the acquisition. When it comes to adding a forklift—or a fleet of forklifts—to your operation, there’s no ‘one-size-fits-all solution.  What’s more, there are a variety of forklift leases to consider.
Here are the five key factors to consider in making the decision to lease, buy or rent a forklift:

5 Considerations Before You Buy, Lease or Rent Your Forklift

1. Forklift usage – How many hours per year will the forklift be used?
2. Operational conditions –  Will the truck be subject to harsh conditions that might shorten its useful life?
3. Operational flexibility – Do you anticipate requiring a different kind of forklift a few months or a few years down the line?
4. Company cash position – How much available capital is there to make a purchase?
5. Tax environment – Is your company in a geographic area or market segment that favors either leasing or buying? 

The Forklift Lease Decision

Leasing a forklift is often the simplest solution, but there are specific operational and financial considerations to take into account to make sure this is the right move.

Forklift Lease Pros

• No capital outlay – Best solution if your company isn’t in a cash position to purchase a forklift. Preserves funds for productive investments.
• Balanced expenses – Regular monthly outlay that can include a maintenance contract. Simplifies accounting and annual budgeting. Lease costs can be deducted as a regular monthly expense. 
• Best for high-use scenarios – If your forklift operates 24/7, it will wear out and require replacement sooner
• Best also for forklifts used in severe conditions like handling corrosive or caustic materials, or in high-rust or extreme temperature environments that tend to shorten the lifespan of a truck.
• Keeps your fleet up to date with new technology and your business needs. If you anticipate your forklift needs changing, you can structure your forklift lease to allow you to change or upgrade your trucks or increase or decrease the size of your fleet.  

Forklift Lease Cons

• Can be more expensive (higher total cost of ownership) than buying a forklift particularly if the application is a low-use scenario without exposure to extreme conditions
• Damage responsibility – You’ll be responsible for any damage to the forklift when you return it at the end of the lease.
• Limited operational hours – Forklift leases generally come with a limit on the number of hours you can use the truck over the life of the lease. Overages imply penalties. 
• Forklift lease options can be confusing – operating lease, capital lease, and flex lease are just a few, and different lease configurations favor certain operational and financial scenarios. Make sure your tax professional helps you select the forklift lease that’s best suited to your needs. Tax codes changed with the 2017 Federal Tax Cut.

The Forklift Purchase Decision

Buying a forklift outright may be the best option for your business. This is especially true if the truck is not going to have a lot of hours put on it, or if it’s going to be used in a temperature-controlled, dry warehouse. Having a qualified in-house maintenance team helps, too. 

Buying Pros

• Your firm has the cash or access to a competitive line of credit that makes purchasing more attractive.
• Your organization has a preference for owning its capital equipment, or its financial structure makes owning more desirable. Forklifts are capital assets that can be leveraged as collateral. Buying a forklift might provide the lowest total cost of ownership if it’s going to be used gently. You can sell it if you no longer need it.
• The application involves relatively light usage in non-extreme conditions. You anticipate that the model you buy will be useful for a number of years. 
• Customization -If you need a forklift with a particular set of specifications, it may not be available as a lease.
• You own the forklift—you can use it for as many or as few hours as your operation calls for, and there’s no penalty owed to a third party for damage. 

Buying Cons

• You need to have the cash or the availability of credit to make the purchase.
• If you don’t have the in-house maintenance team to service the forklift, you may need to buy a service contract. 
• You own the forklift and you own the risks. If something happens to the truck, you are responsible for repair or replacement. Insurance can help minimize that risk.
• Limited flexibility. If your operational needs change, you may have to sell the forklift and buy a different one. 

What About Forklift Rental?

Does your business experience time-limited surges of activity? Renting a forklift might make sense if you have a short-term or seasonal need for a forklift. There’s no long-term commitment, and a maintenance plan is usually built into the rental agreement. Renting is also a great way to road-test a number of different forklifts to determine which type best suits your operating needs.

 Long-term rental agreements are available that can be financially competitive with leasing. Like lease payments, rent payments are deductible as a business expense.

Again, your tax professional can help make the call. 

Give Us a Call

At Apex, our team of sales, financing, and application professionals are at your disposal to discuss your forklift needs and recommend the forklift lease, purchase, or rental agreement that has the best fit. Just give us a call at 833-226-4573. 

Remember Apex when your looking to add new pallet racking systems to your warehouse too — we offer attractive leasing agreements that help you stretch your capital expenditure dollars.