By Scott Thurston, Raymond Handling Concepts Corp., an authorized Raymond Sales & Service Center
Most authorized OEM lift-truck distributors offer a forklift rental fleet to their customers, in addition to selling powered industrial equipment. Such fleets are intended to provide forklift rentals for short-term use during spikes in business or inventory counts or to tide over a business until it moves to a different location. Short-term rentals can make a lot of sense for short periods of time, but when does it make sense to rent for a longer stretch?
In Part 1 of this mini blog-post series, we will examine the benefits of renting a forklift versus buying a new or used unit. In Part 2, we'll address the economics and practical reasons for renting a forklift, as well as compare renting versus purchasing a lift truck. When deciding between renting and buying, it's important to consider the following:
- Overall cost of ownership
- Fleet flexibility
- Fleet management
- Service and repair
- Right-sizing the fleet
Short-term rentals
For the company renting and selling material handling equipment, economics are based on the time the fleet spends idle. The greater the risk that the fleet will remain idle, the higher the rental rate needs to be for the forklift rental company to cover its costs. Therefore, there is a tradeoff between the rental price and the term’s flexibility.
Lowering your forklift rental rate
Many lift-truck companies have weekly and monthly rates. However, for longer-term rentals, forklift rental companies may be willing to discount their rates as they perceive their risk of the equipment remaining idle (and unrented) decreasing. Assuming it is not during the busy season, ask for a discount in exchange for a minimum term. Rental managers might accept a lower payment as long as they feel they have enough available equipment for all of their customers.
Five benefits to renting a forklift versus buying one
- The greatest benefit to renting versus buying a forklift lies in the flexibility of renting. If your business is experiencing volatility, high growth or rapid change, the cost of purchasing and then trading in or selling a lift truck might be much greater than choosing a flexible rental option.
- A forklift rental might be considered an operational expense versus a capital expense. Using the expense to reduce taxable income can be simpler than depreciating a purchased asset. Check with your CPA to understand possible tax benefits for renting versus buying a forklift.
- Businesses that rent forklifts are keenly aware of whether they can get by with the number of lift trucks they have. Often, businesses are more cost-efficient when renting forklifts simply because they look carefully at the justification of a payment each month. This causes warehouse managers to be more careful about having surplus equipment.
- Every lift truck needs maintenance and repair. Renting a forklift on a full-service program removes the risk of having to perform costly and unexpected maintenance repairs. Whereas lift-truck repairs for owned equipment can be sporadic and result in large, unexpected bills, rentals have service and repair costs built into the payment. That means there is no need to come up with cash to repair a tagged-out forklift. Simply call the forklift rental company and ask for the unit to be repaired or replaced.
- Some businesses experience seasonal highs and lows or quarterly inventory counts. Rentals are a better option when the business can plan for predictable seasonal needs. Using a rental program, you can plan expenses to coincide with increased revenue and return the lift trucks when business is slow.
It’s best to rent a forklift if the truck's usage will be variable or if the future need for the lift truck is uncertain. Renting a forklift can be a good option if predictability of expenses and cash flow are key requirements for the business. Stay tuned for Part 2 to read about the right time to purchase a forklift instead of renting one.