Rental or Contract Hire
The best option if:
You don’t want the risk of owning an asset
You’re looking for an off-balance-sheet financing method
You don’t want the responsibility of maintenance and repairs
Forklift rental or contract hire is one of the most popular ways to lease warehouse equipment. In summary, you take control of the forklift truck for an agreed period. It’s yours to operate, but you’ll never commit to owning the equipment. Instead, you’ll pay a monthly fee during your contractual agreement, and at the end of the lease period, you’ll hand the forklift truck back to the leasing party.
Your monthly payment will cover agreed usage of the forklift, as well as covering all the maintenance and repair support you’ll need. If your forklift breaks down, the leasing party will take the responsibility of fixing it – meaning you never have to face the costly implications of breakdowns and repairs.
Forklift rental or contract hire is the right solution for anyone who is looking for an off-balance-sheet method of finance that can improve gearing and other balance sheet ratios.
PROS:
Full use of equipment without the risk of ownership
Payments cover maintenance and repair work
Rental costs are reduced due to another party taking the residual value and obtaining tax benefits
You’ll know exactly what you have to pay and when you’ll have to pay it
CONS:
You don’t own the forklift
You’ll have to stick within your contractual agreement
At the end of your agreement, you’ll have to give the equipment back to the leasing party, without the option of paying one final lump sum to purchase the forklift
Financial Lease, Capital Lease or Ownership Lease
The best option if:
You want to have ownership of the asset
You want the option to purchase the asset at the end of the leasing period
A financial, capital or ownership forklift lease is the right option for anyone who is looking to own their warehouse equipment. In summary, you are permitted to operate the asset and are required to pay a monthly fee to the leasing party, usually over a long period. At the end of the leasing period, you are given the opportunity to purchase the asset you have been leasing. In comparison to rental hire, this means your monthly payments go towards ownership of an asset.
A financial, capital or ownership forklift lease does not include fixed maintenance obligations, and therefore it might be particularly suited to those companies who have their own service mechanics. You would be solely responsible for the upkeep of the forklift.
This is an on-balance-sheet financing option with monthly payments which cover the whole of the capital outlay of your trucks.
PROS:
You are seen as the owner of the asset
At the end of the forklift leasing period, you have the option to purchase the asset
The expenses for the asset are allowed for tax deduction
CONS:
Rentals are not reduced because there is no residual value
Maintenance and repairs become your responsibility
You adopt the risks of ownership
(Full Service) Operational or Non-Ownership Lease
The best option if:
You’re looking for an off-balance-sheet method of finance
You don’t want the risk of owning the asset
You might want to purchase the forklift or continue to rent the forklift at the end of your contract
With an operational or non-ownership forklift lease, you’ll get full use of the asset for an agreed duration, in return for monthly payments. These payments will not cover the full cost of the asset, as is the case with a financial lease. The easy to budget rental payments include VAT and are 100% tax deductible as an operating expense.
This forklift rental method means you are not the owner of the asset. Instead, ownership of the asset will remain with the leasing party; to whom you will have to return the asset to at the end of the leasing period unless you continue to rent the forklift truck or agree to purchase for the residual value.
The operational or non-ownership forklift lease will run for less than the economic life of the asset, as the leasing party will intend the asset to have resale value at the end of the leasing period. The finance vendor or a third party will guarantee a residual value which reduces the rental payments, and rental payments will often include maintenance and repairs too.
PROS:
Maintenance and repairs are often covered in your agreement
The rental payments are 100% tax deductible as operating expense
Rental costs are reduced due to another party taking the residual value and obtaining tax benefits
Full use of equipment without the risk of ownership
CONS:
You are not the owner of the asset
You might not have the option to buy the forklift at the end of the leasing period
The rental period may be short as the leasing party will intend the asset to have a re-sale value at the end of your contract