Making up your mind about whether you want to purchase or go for forklift leasing for your company, can be a great deal of brainstorming. But, the decision becomes easier any given day, if you are aware of the when option best suits an occasion or requirement and what are the pros and cons of each of them. There is no generic answer to the question. The answer would rather vary according to the business application of the equipment, the production work flow as well as the capital situation and cash flow pattern. It is best to talk to your accountant and also the forklift dealer to get a clear idea about the financial benefits that are associated with these options.
Here are all that you need to know before taking the right call.
When do you lease?
There can be a number of occasions on which a company decides to go ahead with forklift leasing. Let’s look at some of them.
- when a company experiences predictable utilization
- since leasing equipment offers the required flexibility to companies so that they can act likewise according to changing needs
- need for capital preservation
- the equipment is required beyond 1500 hours on a yearly basis
- when a company doesn’t want the commitment of owning a fleet
- need for upgraded and latest equipment
Pros of Leasing:
First and most importantly companies won’t have ownership responsibility which also saves you a large amount of working capital. Secondly, you are spared the hassles of reselling the equipment once the lease period is over. Thirdly, companies have to bear lower cash outlays when they require financial flexibility and equipment that are built with latest technology. Precisely, you only pay for what you use.
Leasing equipment is a popular choice that has a few types to choose from based on the company’s usage and needs. Forklift leasing primarily comes in 3 leasing formats namely, capital lease, operating lease and a full-service lease.
The only mentionable down-side to leasing is usage restriction. The degree and parameters of restriction will vary according to the suppliers. So, you must cross-check the usage restriction with your usage needs prior to signing the lease agreement.
Usually, companies only buy equipment when they are certain of using it for at least 7 to 10 years and also when they need specific equipment that are unavailable in leasing markets.
Firstly, buying equipment does not come with usage restriction, as leasing or renting would do. Secondly, it will hold residual value with proper maintenance and predictable yet, low utilization. And finally, it can be resold after the useful life of the equipment at your facility.
The risk of buying equipment is heavier than its benefits, unfortunately. The primary cash outlay would be huge if you purchase material-handling equipment instead of leasing it. Such a large purchase has to be justified by the company’s potential usage and application of it.
Thus, it is always better to go for leasing equipment with its numerous benefits. However, your decision heavily lays on what is best suited for the company.