Deciding to Purchase or Lease a Forklift

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The forklift lease vs. buy dilemma is one most successful small construction business will face sooner or later. This piece of equipment is your company's heavy lifter, whether it's in the warehouse or on the job site, so you need a good one--and you need it to be available at all times. Forklifts are divided into two main types, sit-down and stand-up, which are in turn divided into low-lift and high-lift. There are advantages and drawbacks to every option.

Forklift categories

When you begin your acquisition process, the first thing you need to determine is what kind of forklift you need. If your work demands heavy use in a warehouse with narrow aisles, you're most likely going to choose a model that has the operator stand up, since these have much smaller turning radii.

Your next step will be to determine how high the equipment will need to lift the loads, and whether the operator platform needs to rise with the load or can stay at ground level. If you deal with full pallet loads, you don't need the extra expense of a forklift that has the operator platform coupled with the load-lifting capability.

If most of your forklift use is in open spaces inside a warehouse or warehouse yard, a sit-down forklift may be your best choice. You can readily choose a propane- or diesel-powered rig instead of a battery-powered unit, which normally have the ability to lift much heavier loads.

Additionally, if your forklift will spend most of its time at construction or industrial job sites, you'll probably need the boom-lift type commonly referred to as a Pettibone forklift.

Lease vs. buy

From personal experience, this is the major sticking point in the acquisition process. Both options have their advantages and disadvantages. When you buy a forklift, you own it outright and don't have to budget for monthly lease payments. However, you also have to figure in the cost of ownership, including regular preventative maintenance to keep it running at peak efficiency. Purchasing makes excellent sense if your need will extend beyond 12 to 18 months.

If you lease, your overall cost is much lower. True, you have to make those monthly payments, but you'll also be able to afford a much better piece of equipment than you likely could afford to buy outright. Leasing is also an excellent idea to meet a temporary surge in demand for your business. Leasing makes sense if your need isn't going to last beyond 18 months. Leases also normally come with built-in service contracts, relieving you of the responsibility for major repairs and normal maintenance costs.

The question of leasing or buying your next forklift can hinge on a number of factors, most of which center around the bottom line. A lease may be more expensive in the long run, but it also frees up working capital right now for other uses.

Here's a quick side-by-side comparison on how the two stack up, and which option is better suited to which type of operation.

Comparing the pros and cons

Pros Cons
Buying Renting Buying Renting
Long-term value related to ownership of lift. Substantially lower upfront costs - especially for short-term use. High upfront costs and fees associated with ongoing maintenance. Actual cost can depend on your credit rating and length of lease.
Cost advantage for those with heavy use. No real long-term commitments. Though you have to sign a rental agreement or lease, it's an effective way to test-drive a number of models or trade in those that no longer meet your business needs. Standard electric lift (around 5,000 lbs) sells for between $15,000 and $41,000, with used models going for $2,000 to $19,000. Note: there are a number of models available in the $7,000 price range.

IC lifts start at $28,000 to $35,000 and go above $100,000.

Monthly payment is affected by your buyout option.
Maintenance, repairs, and replacement (if necessary) will often be covered under the rental agreement, greatly minimizing the cost of breakdowns. If you purchase an electric model, you'll also buy a battery for $2,500 and a charger for $800 to $1,500, as well as a battery transporter for $3,500 to $3,700. Long-term, leasing is more costly than buying upfront (and renting is more expensive than both).
Cost can be as low as $500 to $600 per month to lease a smaller lift for five years, and $1,000 to $1,300 to lease a heavy-duty machine for the same period. Maintenance/service plan must be purchased separately.
Easy to upgrade when technology or business needs develop. Broken parts not under warranty must be purchased.
Older equipment may not meet OSHA standards for safety and emissions.
Responsible for the costs and logistics associated with transporting lifts to other sites.
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