A forklift is an essential piece of equipment for many businesses, and but with different forklift finance options it can be difficult to know whether to lease or purchase. Not all leasing options are the same, however, nor are they all suitable for every business.
So let’s discuss some of the most common leasing options available, in order for you to determine what’s going to be the best choice for you.
Long term casual hire
This is a more relaxed way of hiring a forklift – in many cases, you won’t even need to sign a contract. Generally, casual hire is most practical over a six-plus month period.
Casual hire will usually encompass all of your maintenance and service costs over the course of the period you have the forklift. This means keeping the forklift working reliably isn’t going to be an extra expense you need to factor into your finances. Often there will be some sort of provision for breakdown cover as well – though what is covered and the circumstances damage will be repaired is dependant on your forklift supplier, so make sure you ask.
Often there will be exclusions for customer damage, as well as “consumable” items such as replacement forks, tyres, and windscreens (where applicable).
The primary benefit is, of course, that you’re not tied into any sort of contract. You can often have a notice period to terminate of just one month. This makes it a particularly good choice for newer businesses still finding their feet, or businesses that don’t have a consistent need for a forklift.
You can also change your forklift relatively easily. You might need to do this if the requirements you have for the forklift change. Many forklifts are designed to be optimised for certain tasks, so a more efficient machine may be waiting for you if your circumstances change – for example, the need to be able to load/unload heavier weight.
Access to ongoing support is another clear benefit to consider. Often forklifts need to be running constantly in order to fulfil orders and load/unload efficiently. If yours should happen to stop working for any reason, you’ll be able to contact the support team. They will be able to ensure your business stays operational while the forklift is repaired.
Also, your annual services are covered by your payments – so you won’t need to think about the cost of keeping the forklift working reliably. Consumables are usually not covered, so costs such as fuel and tyres will still need to be accounted for. Those services will be scheduled on your behalf, so you don’t have to worry about missing them.
You may find that you’ll get better rates with other forms of leasing. The reason for this is that as there is no contract and very little notice period, it’s considered more of a liability. As with all things, that means the cost has to go up. You might consider this an acceptable investment for improved convenience, but it’s something to consider.
You also probably won’t get a brand new forklift via long term casual hire. Newer machines are usually earmarked for more rigid contracts. The forklift you get will be serviced thoroughly and comprehensively checked to make sure it’s fit for purpose before you take delivery, just know it’s likely to be used.
Forklift Finance on Lease purchase
Lease purchase involves you ultimately purchasing the forklift, however, you’re paying for it in instalments. It’s important to be aware from the outset, that if you choose the lease purchase option that you’ll not benefit from any maintenance or servicing cover of any kind as a part of the package – so the running costs are all on you.
Lease purchase is not going to be the right option for everyone, however, if you want to actually own the forklift without needing to pay the whole cost up front, it may be your best option.
Lease purchase can offer you much more favourable rates of repayment compared to other forms of leasing. The reason for this is when you lease purchase, you’re paying for the forklift itself and nothing else. There’s no ongoing maintenance or repair work to cover, so the monthly price will just be the forklift and interest.
You also get a much wider selection of options as to the forklift you want. Whether it’s brand new or slightly used, the choice is yours. You can easily spread the cost of purchasing it over a time period that suits you – generally anywhere from three to seven years. This means it’s more accessible for smaller businesses as a path to forklift ownership.
And, of course, you get to own the forklift at the end of your repayment term. When you make your final payment, the forklift will be officially yours and you can do with it what you please. If you take care of the forklift well, for the rest of the forklift’s usable life you’ll only have to consider ongoing maintenance, fuel, and consumables.
Lease purchase will not cover any maintenances, servicing, or breakdown cover. You can generally purchase warranties and additional breakdown cover, but they’ll be extra costs for you rather than included as a part of your lease payment. You’re paying for the forklift and nothing more – so if it’s costly to maintain, you’ll be liable for those bills.
You’ll also be committed to your contract, so think long and hard before taking out a lease on a forklift. Think about if you’re going to be able to comfortably manage the repayments over the course of the lease term. If you fall behind, the vehicle will almost certainly be repossessed and you could end up with a negative credit rating for your business.
You’re also choosing one forklift per lease, so make sure you choose wisely. That forklift is then the one you have until the period of the lease is up and the machine is paid for. If your needs change and your forklift no longer matches them for any reason, there’s nothing you can do about it other than take out a fresh lease.
It’s also important to remember that you’ll be subject to approval. So, terms and conditions will apply and you will have to be able to comply with all the pre-requirements for approval. You’ll need a good financial history, and be able to provide proof of consistent financial buoyancy over a period of time – this makes it an impractical option for new businesses.
Contract hire can be thought of as a bridge between hiring and lease purchase. There is a more concrete contract drawn up, which you’ll be bound to, however, at the end of the contract’s term, you will not own the forklift. This has both its advantages and its disadvantages, depending on your requirements.
Maintenance, servicing, and breakdowns will generally be provided for as a part of your contract payments. The same exceptions will likely apply as long term casual hire, however – customer damage and consumables such as tyres, forks, and windscreens if they’re fitted.
Firstly you’ll be able to get access to very generous rates, because you’re entering a secured contract so you’re going to be considered less of a liability. This means that the repayments should generally be lower. As there is a flat repayment charge, it makes it much easier for your business to budget accurately going forward.
You’ll get access to a full backup service and support, to keep your business operating efficiently even if the forklift stops working. The specifics will depend on the contract, but this may include rapid-repairs, or providing you access to another forklift that you can use while yours is being repaired.
Your annual services and many ongoing maintenance costs will be covered as a part of your repayments, which means you won’t have to worry about being liable for any larger mechanical bills that might arise. You will have to cover consumables such as tyres and forks, and in the event that the forklift is damaged by a customer.
You will be committed to your contract for its full duration. So you should make sure your business is financially healthy, and that you project you’ll be able to comfortably make your payments until the term is over. If you default on your repayments, you could lose the forklift and be prevented from leasing equipment or getting access to finance in the future.
You will also not be able to alter your vehicle if your needs change. If you need a bigger forklift, you won’t be able to “swap” it under the same contract. When you’re choosing your forklift, it makes sense to invest a little more upfront to make sure you get a machine that will be able to handle your projected growth over the next few years.
You’ll also need to be positive you’re able to successfully meet the lender’s criteria to be approved for the financing. This means being able to satisfy any proof they may need about your current situation or your financial history. Also, bear in mind that you will not own the forklift – when the contract ends, it will be returned.
Get in touch
Don’t hesitate to reach out to Hiremech today if you require more professional advice about the right forklift leasing options for your business.