One of the questions I get asked by many Big Joe prospects and customers is - Should I buy, lease or rent my material handling equipment? My name is John Hicks, and I am the Southeastern Regional Sales Manager for Big Joe Forklifts. In my 32 years of experience in the material handling industry, I have answered this question innumerable times in a fairly consistent way, which is to suggest that - It depends. I wanted to cover this questions and provide some basic guidance because this is one of those areas where we see companies miss opportunities to potentially save thousands of dollars every year in operating expenses.
Buy, Lease or Rent?
With Big Joe - contemplating purchasing options is not nearly as challenging as one may think because many of our Big Joe brand products are simply not very expensive. It is part of our philosophy to keep things simple and provide lean solutions to our customers with small machines. For example, our electric pallet jacks which are very popular cost just a couple thousand dollars and many times folks purchase them just one or two at a time. However, that said, when a company needs something like a dozen electric pallet jacks in one go then it becomes another matter entirely. For a new company, small company or one getting a new contract that needs to handle more throughput quickly, financing of even small material handling equipment like ours may be key to the best solution for their company.
Sadly forklifts - our’s included, don’t typically increase in value once purchased. If they did a customer would have made a nice investment at the time of purchase. The reality is what they are investing in is not our truck but the capability to operate their core business more effectively. Since capital expenses like lift trucks decreases in value, leasing or renting them can be great strategies to use which allows cash to fund other things that appreciate in value or grow top-line revenues.
That said some may think that means you should always lease or rent, but not so fast….
There are several other consideration to make before deciding to lease, rent or buy.
The advantages of buying a forklift:
- Eliminate finance or interest charges
- Eliminate premiums paid for maintenance, damage and cartage of rental equipment
- Eliminate ongoing liabilities and have the flexibility to sell the truck at any time
- Eliminate exposure to potential tack on charges for extra use or damage that often come at the end of term on lease or rental agreements.
- Eligibility for accelerated or immediate depreciation under new tax laws
- Often a good choice if your forklift will be used less than 1,000 hours per year.
- Often a good choice if your forklift will have low service and repair requirements.
- Often a good choice if your equipment needs are not highly cyclical in nature.
The advantages of leasing a forklift:
- Reduce maintenance costs with short-term leases as equipment is new / warrantied
- Ability to regularly get new equipment with the latest safety and productivity features
- Low-cost monthly payments, as opposed to a lump sum expense, means you can often afford higher quality lifts that are more productive or provide more capability.
- Often a good choice if your forklift will be used more than 1,000 hours per year.
- Often a good choice if you want to preserve working capital.
- Often a good choice if you want off-balance sheet transactions.
- Often a good choice if you want to deduct the forklift as an ongoing operating expense.
The advantages of renting a forklift:
- Provides the most flexibility, although typically at the highest cost
- Provides the most predictable cost as maintenance is included other than wearables
- Often a good choice if the need for equipment is highly cyclical or just for short durations
- Often a good choice if funding is not available for other alternatives
Leasing Eliminates Obsolescence
If there is one reason to consider leasing above other options - by far, my favorite is that you can acquire the equipment you need today and strategically use it cost-effectively by matching the lease duration and equipment lifecycle to your intended usage. By doing so you can get the best years out of your equipment before maintenance costs go up and then upon conclusion of a lease you can upgrade to the latest and greatest versions to avoid dealing with outdated and obsolete equipment.
Think of what it will be like to be using an iPhone 4 when in 4 years everyone will be on iPhone 14. Rather than wait for years for upgrades with leasing you can upgrade quicker and get the latest improvements in ergonomics, battery technology, or even form factor to best fit your changing business needs. A well-tailored lease program also gives you the benefit of having the equipment you need without all the risk and financial pressures.
Please be sure to check out our blog on the different types of lease options available through Big Joe. At the time I am writing this we have an exceptional promotion going through Wells Fargo as an example of our best selling J1 Joey task support vehicle.
At the end of the day, for my money - leasing is a better option on a bigger machine like our Joey than the smaller units like our electric pallet trucks. However, if you are a company that needs 20-30 electric pallet trucks, it can become less clear pending your intended use. It can be a complex decision in all fairness, and there are some nuances based on the environment the equipment will be used in and a wide range of factors for a given company.
That said, this is one of many topics I enjoy discussing with our customers to assist them with making the right equipment choices and purchase decisions unique to their needs. Ultimately, our primary goal is to help other companies improve their business results and that is what makes this industry and working on the Big Joe sales team rewarding for me each day.
By John Hicks