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.”
Leasing also allows companies to keep trucks only in the early years when they are most productive and then send them packing when they start to wear out. “When you lease you’re able to turn in the asset before the maintenance cost begins to increase,” says Oda. “And you can customize the lease term to your operating hours so that you balance the cost to maintain the asset.”
A major benefit of leasing is being able to get vehicles with the latest technologies—without laying out the cash. “Companies that regularly upgrade equipment due to changing operational demands typically value a leasing option because of the ability to capitalize on new products and technology,” says Gabriel.
“There’s changing technologies on forklifts and you’re not tied in if you are leasing; you are able to take advantage of the term of the lease and acquire new technology as it becomes available,” says Oda.
And when it’s time to dispose of your lift trucks at the end of its useful life, the leasing company takes care of that for you.
Most importantly, leasing allows grocery and foodservice distributors to focus on their number one priority—serving their customers. “The biggest benefit to leasing is that it keeps the distributor focused on their core competency and out of the lift truck businesses, so they can do what they do best,” says David Morzella, warehouse product sales manager of Toyota Material Handling USA, Irvine, CA.
Making It Work
Financial companies offer many types of leasing programs to suit your needs—the trick is finding the right program for your business. In addition to the right leasing terms, a good maintenance package will help you get the most out of your lease.
“Customers that choose to lease often prefer the cost certainty that comes with this decision,” states Tate. “Specifically, they will purchase a maintenance component as part of the lease so those costs are not variable during the term. Local service helps ensure the integrity of the maintenance as well as limit shipping costs of the forklift.”
To make the most out of your lease, experts recommend that you work closely with your lease company. “The most advantageous path is working with a single-source provider that can bring single invoicing, consistent maintenance and flexibility during or at the end of the lease,” says Tate.
“We take the time to sit down with customers to come up with the most beneficial plan. One size doesn’t fit all,” concludes NACCO’s Goodwin. d