Deciding which material handling provider and equipment you want to go with can be a difficult and drawn out process. Determining what purchasing method to use to procure that equipment, however, doesn’t have to be. Buying, renting, and leasing forklifts all have their own unique advantages. The points outlined in this article will help identify which method is best for your operation so that you can get those forklifts on order as soon as possible.

Advantages of Buying a Forklift

1. Return on Investment – This is the only option that will allow you to resale the forklift, which can be a valuable way to increase your return on investment depending on the residual value of the forklift and how well it is maintained. Purchasing forklifts is generally provides better return on investment compared to long-term rentals since rental fees are higher than monthly financing costs.
2. Customization – Buying a forklift means you have ownership of it, similar to owning a car. This allows you to make more modifications to the forklift than you could with a rented or leased vehicle. Ordering a new forklift allows you to customize it with factory installed options tailored for your application.
3. Tax Deduction – Forklifts that are purchased can be eligible for tax deductions, unlike rented or leased vehicles.
4. Liability – Rental and lease vehicles must be returned after a set period of time and are expected to be in a reasonable condition based on the verbiage in your contract. Purchased vehicles are yours to keep, so cosmetic damage isn’t as much of a concern.

Advantages of Renting a Forklift

1. Seasonality – Renting additional forklifts only as needed for seasonal purposes can be a great economic way to have additional equipment only during the times that you need it.
2. No Long Term Commitment – Since rentals are usually payed for on a month-to-month basis, you have the ability to return the forklift or swap it out for a different one from your dealer’s stock.
3. Short Lead Times – Most forklift dealerships have ample stock of a variety of material handling equipment, so you don’t have to wait for a new forklift to be built and shipped to you from the factory.
4. No Financing Required – Renting forklifts requires no capital financing, eliminating an extra step in the approval process.
5. Reduced Maintenance Costs – Planned maintenance is generally built into the rental contract, meaning any time your forklift is down due to normal wear and tear, a technician will come to repair it at no added cost.

Advantages of Leasing a Forklift

1. Predetermined Replacement Cycle – Leasing allows you to set the number of years for the term of the lease based on your operation’s needs. Shorter leases tend to work better for companies that want to be more fluid and for high-cycle, high-throughput applications that will put more wear and tear on the forklifts more quickly.
2. Lower Monthly Costs – Leasing offers lower monthly payments compared to buying or renting, allowing you to pocket more cash on a monthly basis.
3. Less Paperwork – Owning a forklift or fleet of forklifts requires additional paperwork and fleet management duties than leasing does.
4. Latest Models and Features – Leasing allows you to keep a rotating stock of new forklifts in your fleet so that you can utilize the latest and greatest models and technology. Similar to purchasing, these models can also be custom built for your application.
5. Flexibility – When the terms of the lease are up, you can make adjustments as needed to increase or decrease your fleet size, change the product mix, modify lease terms, and more to fit your constantly changing needs.

In less than 60 days new accounting rules will impact operations, and organizations whose finance and operations personnel are on the same page will benefit the most.  Selecting the right financing is just as important as choosing the right equipment.  No matter the fleet size, these changes will compel an even greater collaboration between those who cut the checks and those who rely on forklifts every day.  

The Financial Accounting Standards Board (FASB) has approved changes to Accounting Standard Codification (ASC) 842, which affects operating leases.  On January 1, 2019, the Finance Accounting Standards Board's FASB13 will take effect.  FASB13 calls for every lease to be classified as either an operating lease or capital lease based on specific criteria. 

Currently, capital leases are reported on the balance sheet as an asset and liability.  Operating leases, however, are supposed to be footnoted on the balance sheet but are expensed on the income statement.  The new guidance generally stipulates that lessees will be required to recognize both Capital and Operating leases as assets and liabilities for leases with term of more than 12 months.  Beginning Jan. 1, 2019, all leases (capital and operating) will be required to be accounted for on the balance sheet as right-of-use (ROU) asset and lease liability on their balance sheet. * 

“This will have a couple of significant impacts to companies. First, having all leases on the balance sheet will give creditors greater visibility to total liabilities. Secondly, many companies did not require capital approval of off-balance-sheet acquisitions such as rentals and operating leases, which made it quicker and easier to obtain equipment.  The increased scrutiny associated with on-balance-sheet capital approvals may slow or restrict some companies’ equipment acquisition process, which makes it more important than ever for finance and operations to partner up,” Sue Rice says.  

Leasing is an increasingly popular means of controlling expenses and guaranteeing access to the latest technology.  The best way to keep finance and operations departments aligned is to use a data-driven approach to fleet management.  Data is becoming increasingly important in the material handling industry, which is why telematics systems are growing in popularity.  Toyota T-Matics MOBILE and T-Matics COMMAND deliver important insights about your forklift and operators.  T-Matics offers a solution that gives greater visibility to your fleet's performance.  Some of the features include fleet utilization/optimization, web-based dashboards & reporting, electronic hour meter collection, fully mobile, impact detection, etc.  Bottom line...What gets measured, gets managed.  

Still have questions?  Dillon Toyota Lift is here to help.  We can help determine what equipment and finance options are best for you in the long-term.  

*We encourage customers discuss these changes with their Accountants, Auditors and Creditors to better understand the effects these revisions may have on their business.