Once you’ve selected the material handling equipment that meets your needs, you have an important decision to make. Will you lease, purchase, finance, or rent? The right agreement should reflect your operational needs and long-term goals. The best financing option depends on how you will use the equipment, how long you will need it, and whether ownership aligns with your operational and financial goals.
Operating or Fair Market Value Lease
An operating lease, also called a fair market value lease, is designed for customers who want to use the equipment for a set period, then return or replace it at the end. This type of lease generally provides lower payments than an agreement designed around ownership, but it will not help you build equity in the forklift.
Dollar Option or Capital Lease
A dollar option or capital lease is structured for ownership. The buyer makes fixed monthly payments over a set term with a final purchase price of $1. Payments are typically higher because the equipment is being paid down, but ownership transfers to the customer at the end of the term. Unlike other lease agreements, dollar option leases are considered capital expenditures, which means you may be able to use Section 179 to write off part of the equipment cost in the first year.
Flexible Lease
Flexible “flex” leases are designed for companies whose equipment needs may change before a traditional lease term expires. For example, businesses such as 3PLs often align equipment commitments with customer contracts rather than standard financing terms. A flex lease can be customized with shorter terms, cancellation options, or alternative payment structures.
Traditional Term Loans
Traditional equipment purchase loans provide a straightforward path to ownership through commercial banks, credit unions, and SBA-backed programs, typically for terms of up to 72 months.
Rental Purchase Option (RPO)
A rental purchase option is ideal for operations that want to validate equipment performance before purchasing. The equipment can be used in the customer’s actual application to confirm it meets operational requirements, with a portion of rental payments applied toward the purchase price if ownership is ultimately desired.
Usage Agreement or Long-Term Rental
A usage agreement or long-term rental may be ideal for businesses with defined usage levels, temporary projects, seasonal demand, or operational requirements that are not well suited to a traditional lease.
Before You Decide on Forklift Financing
Compare Costs
The lowest monthly payment may not always be the lowest-cost option. Review the broader financial picture before deciding whether to lease, buy, replace, or extend a rental. You’ll want to consider:
- Monthly payments
- Maintenance and repairs
- Existing rental expenses
- Downtime and lost productivity
- End-of-lease charges
- Buyout price
- Remaining useful life of existing equipment
- Replacement cost
- Labor and energy requirements
Find a Fit: Questions to Ask
- How long do you expect to need the equipment?
- Do you eventually want to own it?
- How predictable is your usage?
- Is the need seasonal, project-based, or permanent?
- Do you prefer to preserve capital or build equity through ownership?
- How much flexibility does your operation require?
When to Buy a Used Forklift
If forklift rentals for your business follow a predictable pattern, purchasing a used forklift for peak periods may cost less than repeatedly renting one. A business that rents additional equipment during the same busy seasons every year may benefit from keeping a used forklift available for those periods.
When to Buy Out Your Forklift Lease
If an existing leased unit has low hours and remains reliable, purchasing it may be more economical than replacing it. Conversely, replacing a forklift that no longer meets operational requirements may provide greater long-term value.
GET A COMPLIMENTARY CONSULTATION
A fleet review that includes rental, service, and overall equipment spending can help identify where ownership, leasing, used, rentals, or a mix could deliver better value for your operation. Talk to the experts at Shoppa’s today.
