Buying or Leasing a Forklift: Which Is Best for You?
Buying and leasing are both great options when you’re planning to expand your fleet of forklifts. Which option is right for you will depend on a range of different factors — including your budget, your timeline, and your broader business goals. In this article, we’ll look at some of the pros and cons of each option and attempt to provide a set of simple guidelines that will help you reach an informed decision.
The Pros and Cons of Buying a Forklift
Buying a forklift gives you a useful asset that will add value to your business. If your business needs change or you’d like to upgrade to a different model, you always have the option of selling your forklift to offset the cost of doing so. Also, when you own your forklift outright, you can modify or customize it as necessary. You also don’t have to worry about cosmetic damage or other wear and tear that may be an issue when returning a lease.
The downside of buying a forklift is the higher capital requirement. You will need a down payment and, in many cases, commit to financing, which can eat into your available credit and make it difficult to afford other improvements. However, there may be tax advantages to buying which are not available with a lease.
The Pros and Cons of Leasing a Forklift
Leasing is simple and worry-free — you pay a set fee each month and don’t have to think about your investment depreciating. Costs are often lower per month, and you have the freedom to walk away when your lease is over. Leasing initiates a predetermined replacement cycle, which means you aren’t sinking money into aging equipment, you always have a relatively new and modern fleet, and you enjoy more predictable budgeting for ongoing maintenance and other operating expenses.
The main drawback to leasing is that it is effectively a sunk cost that doesn’t add value to your business. You are also limited in how you can use the equipment. It may not be possible to modify your unit, and you will need to be more vigilant about taking care of cosmetic damages before the lease is up.
Generally speaking, buying outright is the best option if you have the internal capacity to maintain your fleet according to the manufacturer’s recommended schedule. Leasing is better if your utilization needs are less predictable or if you want to implement a predetermined equipment replacement cycle.
Other options for expanding your fleet include:
- Buying used: Buying used saves you money and helps you avoid the initial depreciation of buying new, while still giving you an asset you can sell later. However, there is always an element of risk when buying used. Working with a reputable dealer with knowledgeable technicians can help you mitigate this.
- Renting: Renting involves higher fees than leasing, but represents less commitment. It’s a great option when part of your fleet is down for repairs, when you have a special project requiring extra working capacity, or for other short-term needs.