MANY businesses grapple with the choice between buying or renting a forklift which could impact both their efficiency and bottom line.
That’s according to Marco Caverni, CEO of materials-handling specialists, Masslift Africa, who said that although most of their clients choose to rent forklifts, this may not make business sense in some cases.
“Businesses must weigh up different factors such as the frequency the forklift would be used, the cost of capital financing and maintenance,” said Caverni.
He believes the decision ultimately hinges on how frequently the client expects to use a machine. He suggests that renting with ownership or outright purchasing is best for lower utilisation applications.
If a forklift is used for fewer than 150 hours per month – or 9,000 hours in five years – it makes sense to own the asset and sweat it for another three years thereafter until it reaches the 14,000-hour ceiling.
“With a forklift being a grudge purchase, as it either adds to your cost of production or your cost of distribution, it is vital you get the maximum use out of the asset over the period of its economic life. At Masslift we believe that it becomes uneconomical to maintain a forklift after 14 000 hours.”
Caverni said renting makes better business sense for higher utilisation applications. A forklift that operates around 200 hours per month would do approximately 12,000 hours after five years. This would leave limited additional time to sweat the asset further. In this case, renting is advised, which allows the client to return the machine after five years and replace it with a new one.
Additionally, if the use of machines is seasonal and the types of machines required vary in the client’s operations, it is more convenient to be able to rent the required machines during busy season without incurring storage and maintenance costs for the off-season periods. It also becomes possible to have different types of machines meeting the operation’s requirements without buying them.
Cash Flow Considerations
Clients need to assess whether they have the necessary cash flow to pay for a forklift which could also be hampered by required capex approvals internally. If not, then a rental or rental with ownership is the natural solution. Caverni said opting to rent instead of buying means the client faces indefinite payments towards an asset they would never own.
“Most people rent for 60 months, and on average, the forklift will have around 6,000 to 9,000 hours on the clock at the end of the term, and then the customer replaces it with a new unit and starts the process again. If you purchase a quality forklift, it can run to over 14 000 hours. So, you lose out on sweating the asset for that extended period – the additional 5,000 hours.”
However, the benefits of renting often outstrip the costs, including saving on the large capital investment especially in the current economic times where financing institutions are more stringent with their lending criteria.
Caverni said that from a cash-flow perspective, it is more attractive to rent as the monthly amount is determined upfront and is unlikely to change over the rental period. The consistent monthly rental payments provide predictability of cash flows within the business.
A rental also comes with an inbuilt maintenance contract, so you have the peace of mind that backup is not far away if the forklift ever breaks down and those costs will not affect your bottom line.
Clients can rent forklifts from Masslift on an hourly, weekly or monthly basis, while there is also the option to extend the term to as long as 120 months. Caverni said the ultimate benefit to clients is the peace of mind they receive from Masslift’s industry-leading service and the world-class forklifts.
“When you are renting a forklift, your three main requirements are that the forklift is legally fit to be used, the forklift is reliable, and that the forklift’s running costs are as low as possible. At Masslift, we ensure all forklifts on our fleet are load-tested annually, and we do not rent our forklifts without a valid load test.
“We also only rent forklifts younger than 10 years old with lower hours, rather than renting older units with major hours on the clock like a lot of other companies do. And lastly, the Mitsubishi Forklift is incredibly fuel efficient, and will save the client money throughout a forklift’s life. ”
For clients who can afford the initial capital outlay required for an outright purchase or have the required credit facilities, Masslift offers over 170 models of Mitsubishi forklifts with an eight-year/12 000 powertrain warranty – according to Caverni the longest in the South African forklift industry.