Are You On The Right Path?

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 FORKLIFT OPERATION AND SERVICE. BE SURE TO VISIT THE HOME PAGE FOR INFORMATION ON LIFT TRUCKS REPAIR, SERVICE, TROUBLESHOOTING, AND EVERYTHING YOU NEED TO KNOW ABOUT FORKLIFTS AND THEIR USE.