Options for Buying New Warehouse Equipment
Equipment Acquisition: What Are My Options?
Finding the right forklift equipment for your business is not easy, and quite often the available equipment acquisition options will be a considerable factor in your decision. Options include leasing, outright purchase, Rent to Own, Long or Short Term Rentals, etc… So how do you know what answer is best for your business?
Things to Consider in Your Equipment Acquisition Process
When acquiring new equipment, three primary options are usually considered, but deciding on the best option is mostly a factor of your business, your budget, and available finance options:
- Outright purchase (paid in full, with no monthly obligations)
- Lease (can be considered a purchase method, or a long term rental)
Purchase – Your Company’s budget is one of the most important considerations and could be the main deciding factor. Purchasing a new or used forklift requires a significant upfront investment. You will need to assess your company’s resources to see if you can afford investing in this equipment. If you are not the type of business that is continually changing, and a reliable forklift operating at a moderate speed is what you need, than purchasing a new forklift should satisfy your requirements for a minimum of 5 to 7 years. The drawback to a purchase is that you now have to manage the maintenance and safety of machinery that is not only depreciating, but becoming obsolete as new advancements in technology are introduced on next generation models.
Renting – Renting a forklift is ideal for short-term use, but you will typically pay more for a rental than you would for a lease. If you only need a forklift while getting through seasonal order changes or short unforeseen periods where additional equipment is required, a rental may be the better option. If your business needs require longer term rentals and you’re willing to agree to a long term contract, most equipment companies will offer reduced rates, and will even order new equipment suited to your business. The benefit of rental equipment is the maintenance and management of the asset is the responsibility of the equipment company, you only have to focus on the monthly cost with is a business expense.
Leasing – Leases come in two basic forms, Capital Leases, and Operating Leases. Before you can decide on what makes sense for your business you need to understand the difference.
Capital Leases are structured in such a way that the majority of the useful life of the equipment (typically 75% or more) will be consumed during the lease period. There is usually an assumption the lessee will obtain ownership of the equipment at or prior to the end of the lease term. This type of lease is often referred to as lease to own. Since the nature of a capital lease is to eventually transfer ownership, the equipment is considered a depreciable asset/liability on a company’s balance sheet.
Operating leases are structured in such a way that there is useful life in the equipment (typically not less than 25%) at the end of the term. With an operating lease the end of term results in the lessee returning the equipment with no further obligation to it. As an operating lease has no ownership opportunity, there is no balance sheet impact, and the lease payments are an incurred business expense.
Not sure which is Right for Your Business? Discuss Your Needs with an Expert
To find the right equipment for your company, you may need the assistance of an expert. Arpac can help you find the right equipment based on your budget, frequency of use and overall need. We offer unique rental plans, purchases for used and new forklifts and we will assist you with a lease program structured properly for your business.
Call us at 800-946-8511 to learn more about our forklift products. We carry New and Used Crown forklifts, Nissan forklifts, UniCarriers forklifts, and Taylor-Dunn Burden Carriers with multiple financing options. Fill out an online contact form today and a sales representative will be in touch with you shortly.