Cost control is always top of mind for warehouse and distribution centre managers, and with mobile powered equipment being a big part of most operations, this is an area that often reveals opportunities for savings. Leasing equipment is one option that can reduce costs for operations managers.
“In an unpredictable market, it’s very difﬁcult to anticipate your future fleet needs,” notes Shane Weistra, national leasing specialist with Johnston Equipment. “With a lease, you avoid owning capital assets you may not need down the road.”
Weistra also points out that leasing can provide greater asset accounting flexibility.
“For example, a customer may require an operating lease where they can record the asset as a monthly expense while not recording corresponding debt onto their balance sheet,” he says. “A capital lease is the opposite; the asset is recorded onto the balance sheet ,as well as the corresponding debt, and the client will need to depreciate the equipment instead.”
Weistra adds that leasing also simpliﬁes the budgeting process with one consistent payment, “even more so if you combine a lease with a service maintenance plan”.
Leasing can also play an important role in fleet optimization, in Weistra’s view. “You avoid equipment obsolesce and can take advantage of the latest material handling technology [through replacement of equipment at the end of the lease term],” he notes.
Replacing lift trucks more frequently as technology evolves allows access to the newest in productivity enhancements and at the same time, avoids wasted time in the service bay.
Among the leasing options Johnston Equipment offers is traditional closed-end leasing (where at the end of the term, Johnston is responsible for the residual value, assuming normal wear and tear). While speciﬁc terms of 24 to 84 months are possible, Johnston will also work with customers to provide tailored leasing structures that take customer needs and challenges into consideration, including internal approvals, equipment relocation, lease restructuring and equipment issues.
“For example, a customer that has a high-hour application should consider a shorter-term lease, so the term better aligns with the equipment’s useful life in application,” Weistra says. “This feature allows customers the beneﬁt of reduced downtime, the latest technology and the ability to ensure that they are optimizing productivity.”
He adds that companies with multiple locations may need to move equipment around to meet various business needs, and will therefore want to ensure their lease agreements are structured so that a minimum of paperwork is needed—especially for inter-provincial moves.
Restructuring a lease, Weistra notes, may be needed when a customer’s business needs change and, along with that, so does the usage of the truck. “When this happens, a customer may end up doubling the amount of hours being used on a truck when the lease was not structured for the increased demand, which can cause overage charges at the end of the lease term,” he explains.
Weistra therefore advises companies to ensure all lease agreements allow for restructuring mid-term, and include regular reviews of usage “so you can proactively restructure the agreement as needed.”
Liftow also offers many tailored programs depending on application, use and other needs of the customer. “In general, they are lease-to-own, lease, lease with full maintenance and long-term rental,” explains Jamie Stephen, Liftow general manager of sales and the Western Ontario district.
Lease with full maintenance is for customers who want cost certainty over the course of the lease, he says, but still want the option to own at end of term. Long-term rental is for customers who also want cost certainty, with less administration and no ownership at end of term.
“This helps businesses who want the tax beneﬁts of writing off the expense of the equipment in the year it is accrued, and who also wish to preserve capital spending for production and marketing initiatives,” Stephen says.
Liftow offers a number of other inducements including free demos, speciﬁc product specials, extended warranties, special ﬁnancing rates and several free service options.
“Free demonstrations allow the customer’s forklift operators to try the equipment in their facility,” Stephen explains. “Speciﬁc product specials might include a special pricing rebate for a speciﬁc product, a delayed ﬁnancing option or subsidized interest rates. Extended warranties are sometimes offered on a new product or a speciﬁc product for a certain period of time (typically three months). Special service options might include free preventative maintenance or extended warranties.”
Hewitt Equipment Limited/Hewitt Material Handling offers both short and long-term lift truck rentals. Advantages of short-term rental include increased productivity during peak seasons, the ability to handle unanticipated product volumes and to maintain production during equipment servicing or breakdowns, explains market strategy manager Liana Bellizzi. With its ‘Global Solutions’ long-term turnkey rental program, Hewitt handles all repair and maintenance, which allows companies to maximize productivity and reduce capital costs.
Lastly, the company offers a rental purchase option, where a customer can rent a lift truck for six months. “Any time during the six-month period the customer can choose to purchase the unit at a given interest rate and the payments made until that point will be put against the purchase price of the unit,” Bellizzi says.
“This option is applicable to customers who need a rental unit for a given period but are unsure whether their volumes will merit the permanent addition to their fleet. It is also applicable for those who would like to try the lift truck before committing to the purchase.”
In addition to lease-to-own and long-term rental, Wajax offers leases with a ﬁxed residual position. In this case, the customer may elect to return the unit at the end of the lease term, but is ultimately responsible for the residual value of the equipment on return. This arrangement includes a lower monthly payment than what is typical through traditional ﬁnancing.
Another option offered by Wajax is a walk-away lease, which provides the greatest residual position and signiﬁcantly reduced monthly payments, notes Wajax director of material handling Sajith Manikath. “It’s a usage-based contract allowing customers the greatest flexibility at the end of the lease term offered when the customer asks for an operating lease or off-balance sheet leases,” he explains.
Wajax also offers a ﬁxed purchase price lease, which Manikath says is gaining popularity. In this situation, a usage-based contract allows the customer to return the equipment at the end of the lease term or buy it at a pre-determined amount.
One last Wajax option is called ‘Power-by-the-hour’, a new rental initiative where the customer pays the dealer only for the usage of the lift truck. “This is a very useful program for customers who are not sure how much usage they may need in the long term,” Manikath explains. “This option gives them the time to gather data on actual utilization and make the best decisions about future requirements.”
Whichever leasing or other program you decide to use, Weistra offers some last pieces of advice. “Watch for hidden costs like administration fees in terms and conditions, which may be masked in lower interest rates,” he says. “Be sure to do your due diligence in vetting the ﬁne print on your leasing agreement before you sign.”