Forklifts are the true workhorses of any busy warehouse—and having a reliable lift truck fleet is essential in today’s busy food distribution centers. Losing a lift truck for a day could prevent you from fulfilling an order for an important customer.
While it may not be financially feasible to buy a fleet of new lift trucks—or even a few—leasing is a viable alternative to purchasing. Leasing enables grocery and foodservice distributors to acquire new and modern lift trucks without tying up a significant amount of capital. Payments are typically fixed for the term of the lease and as inflation occurs, payments remain the same, so companies receive more value for their dollar. And leasing can simplify budgeting, because companies will know what that equipment will cost over the term of the lease.
However, there are concerns when it comes to leasing a lift truck fleet—to a first time lessor, it might be a tough decision as it fundamentally changes the way a company does business. But lift truck leasing is a growing trend in the food industry, according to industry experts.
“Five years ago, there wasn’t an interest in leasing lift trucks, but the trend has been toward leasing,” says Tina Goodwin, director of financial services of NACCO Materials Handling Group Inc., Greenville, NC.
“The majority of our foodservice distribution customers lease their lift truck fleet and an ever increasing number of our customers are now choosing to lease their equipment,” states Eric Gabriel, manager of fleet operations and financial merchandising at Houston-based Mitsubishi Caterpillar Forklift America Inc. (MCFA). “Over the past five years, leasing has steadily increased as a percentage of our overall business.”
Wes Oda, national accounts manager of Toyota Financial Services Corp., Torrance, CA, also notes the increasing interest in leasing. “Companies are looking for ways to leverage their costs and leasing allows companies to do that,” he says.
Not all experts are seeing the same trend. “While a significant number of our food service customers lease their Crown forklifts, we have not seen a noticeable increase in this option,” says John Tate, senior vice president of Crown Equipment Corp., New Bremen, OH. “The down economy impacted investment in forklifts overall as opposed to a shift in the form of payment.”
The rise in popularity of leasing is due to the amount of benefits it offers. “The primary reason to lease is to optimize the economic life of the equipment,” says Gabriel. “Our job is to help our customers gain a better understanding of what the optimum economic useful life is for their forklift of forklift fleet.”
“With owning, companies tend to keep the lift trucks longer than they should,” says NACCO’s Goodwin.
Not having to list the lift trucks as an asset on the books is another plus. “If you lease, you don’t own the equipment, so you don’t have to show it on your assets,” says Goodwin. “However, that may change in the future.”
That’s because the Federal Accounting Standards Advisory Board (FASAB), a Washington-based agency that develops accounting standards, is expected to change the rules governing leasing to conform to international standards—which would make lease transactions transparent on the balance sheet. The ruling is expected to have the biggest impact on large ticket transactions. “Decision makers must keep a close eye on the pending changes to the leasing rules. We’re anticipating a final decision from the FASAB as soon as 2012,” says Tate.
“Leasing offers built-in flexibility,” says Bill Buckhout, sales and marketing manager for Raymond Leasing Corp., Greene, NY. “Leases can offer freedom to locate, the capability to change the use characteristics, [and] the ability to return unused equipment.”