Are You On The Right Path?
Leasing or renting your next lift truck could save you money . . . and more.
Acquiring a new (or used) lift truck is a big decision. But choosing how to pay for it can be an even bigger one.
Make sure your lift truck acquisition plan is on the right path by understanding your options, as well as which
one is best for your application.
There are three basic alternatives to acquiring a lift truck - buy it, lease it or rent it. Each has its own set
of advantages, and choosing the right one depends on the criteria you consider important.
The chart below provides details on each alternative and should help you narrow down the best payment methods for
your application. If you discover that owning your lift truck isn't a top priority, leasing or renting can offer
you a host of benefits.
Leasing
Leasing a lift truck simply means buying the use of it. Leasing offers the lowest
monthly payments of the three options and is typically used by those who want to keep their lift trucks for a longer
period of time.
Leasing, as opposed to purchasing, also minimizes initial cash outlay. Almost all leases require a smaller initial
investment than traditional loans. This frees working capital for other investments while keeping your borrowing
power and credit line unaffected.
Two types of leases are available to you:
True lease.
Just like it sounds, this is a lease in its traditional form. Under a true lease, a lift
truck dealer or its financing house claims ownership and takes full tax benefits. It passes those benefits on to
you in the form of reduced payments. This is the main reason you may be able to afford a faster/quicker/better
lift truck than if you had to purchase it. You can also treat the lease payment as an expense (a benefit for U.S.
federal income tax purposes).
At the end of a true lease you have three choices: to purchase the lift truck for the fair market value, continue
to lease it or return the lift truck to your dealer.
Lease purchase.
Typically thought of as a lease, this is really a loan. Similar to a bank loan, a
lease purchase requires a monthly payment that includes both principal and interest. At the end of a lease purchase
term, you have the option to buy the lift truck at a predetermined cost, usually $1.
Lease purchase provides the benefits of ownership - you claim the depreciation, interest expense and other incidentals
related to ownership.
The downside is that because the lift truck dealer doesn't take any benefits of ownership, it adds a profit margin
to the interest charges incurred. This makes the monthly payment for a lease purchase higher than for a true lease.
Renting
Choosing to rent a lift truck is typically done on a much shorter term than a lease.
Most lift truck users rent when they know they will need a lift truck only for a specific job. For example, if
a seasonal application requires the addition of another shift, you can rent more lift trucks to get the job done.
At the end of the time period, you return the rented lift trucks.
Whether you're considering buying, leasing or renting, keep the following questions in mind:
1--Do I really need this lift truck?
2--Can I afford it?
3--How long will it be used in the
current application? How long will it remain useful for future applications?
4--What will my out-of-pocket costs
be?
5--Which method is best for you?
CRITERIA LEASE RENT BUY
Ownership desired
Ownership optional
Use and return only
Lowest total cost
Lowest monthly payment
Off-balance sheet financing
100% financing
Cash surplus/trade-in
Expense 100% of payments
Depreciation write-off
Uncertain business future
Temporarily avoid debt
Try out machine
Improve cash flow
Planned machine replacement
No equipment disposal