If you are going to put up a construction firm but don’t want to spend so much of your capital on buying equipment, then leasing them is the best decision you’ll make!
In this guide, we will be discussing the forklift leasing prices, its factors, and advantages.
Be aware that leasing and renting are two different terms that have different agreements.
In a lease contract, there is a set duration usually from a minimum of 12 -24 months, wherein you act as the owner of the equipment without having the liabilities of damage and repair since you are backed up with a warranty. While renting equipment will only provide you a month to month basis on the use and the price of the equipment. Any damages resulting from improper use will be charged against the renter.
Forklift Lease Average Cost
The average cost to lease a forklift depends on the duration of the contract as well as the model you will be leasing.
There is a way for you to be able to compute the possible rate of your lease per month.
If you plan to lease a forklift for 5 years (60 months) the rate could go from $275 up to $880 a month. Remember that if you choose a shorter term for the lease, the higher the price may be quoted.
In order for you to calculate the possible forklift lease rate you will need to follow this formula:
Lease Rate = Depreciation + Interest
Depreciation = Current Forklift Value – Residual Value (50% of the current value) / Monthly Payments
Interest = (Current value + Residual value) x (Interest Rate / Monthly Payments)
For example, if you will be renting a forklift with a current value of $60,000 and a residual value of $30,000 for 5 years, your depreciation cost would be $500. If the current interest rate is at 7% then the interest rate would be 0.07 / 60 or 0.0012.
Now that you have the interest rate, you can calculate the interest per month which would be ($60,000 + $30,000) x 0.0012 which would be $108.
Since you have both depreciation and interest you can now estimate that the average monthly payment is $608.
Here are the inclusions that you will be expecting when you lease a forklift:
- The Forklift – the equipment and its accessories will be included.
- Warranty – a warranty will be issued to you by the leasing company which runs from the time of lease up until the end of the contract.
- Operator Manuals – this comes along with the lease of the forklift for instruction and guidance purposes.
- Battery Charger – if you will be leasing electric forklifts instead of the traditional diesel powered lifts, the company will provide you a charger to maintain battery life.
Other Costs to Consider
Here are some other costs you might want to consider;
- Guarantee Deposit – the financier will have to charge a guarantee deposit or downpayment prior to the monthly charges for the lease. This is a non-refundable charge to lock-in the lease.
- Delivery – this is an additional cost which may take around $100 – $150.
- Refueling – though the forklift will come fully fueled, fuel costs will come into play once you impose frequent use on the machine.
- Utility Cost – if you are leasing electric forklifts, you might want to consider how much it consumes on your electricity bill for charging.
- Storage area – like most equipment, you will need to have a storage space for the machine’s safekeeping. Prices may range from $175 up to $399. You may also incur delivery charges to get your forklift to the containment unit.
- Insurance – you would want to keep an insurance policy in case of any injury to personnel. Though your equipment is backed up by a warranty, your staff is your responsibility. According to Zane Benefits, it could cost you almost $5,200 for a single employee.
Check the condition of the equipment before signing that contract! Don’t waste time waiting for the replacement equipment because it was faulty in the beginning,
Make sure you have a good credit score on your credit card. Most leasing companies inspect your credit card account statements to see whether you have the financial capacity to support payments monthly.
Study the market. You’ll be able to save up on cash if you keep watch on the fuel costs. Refuel when the price is at the lowest.
When storing the equipment, you may want to keep it shiny and looking good as new while it stays with you.
Forklift Lease Cost Factors
Below are the factors that affect the quote that you get:
The size of the Forklift – size would be a main factor.
Credit Score – some companies ask for your recent bank statements in order to review your credit score. If you have bad ratings, you might find it hard to get affordable or discounted forklift lease rates.
Business History/ Years of Operation – just like looking into your credit score, rental companies may also do a background check on your operations history.
Length of the plan – you would need to consider how long you will be leasing the forklift. If you want to cut down on expenses, try to lease it longer so the price is divided into more months.
Type of lease – there are 2 main types of leases that could affect the cost of the lease. The first would be an operating lease wherein you would have the option to purchase the lift at its fair market value after the lease contract, give the equipment back, or renew the lease. The second type would be the capital lease wherein you have a lease-to-own type of contract.
Hours of use – you have to provide the company a projected daily use of the equipment. This will also be considered in the calculation of the residual value of the forklift. It is usually 50% of the current value, however, can still change depending on the total annual use of the machine.
The main use of the Forklift – companies will try to determine what your main use for the forklift will be. They may add extra charges for high-grade maintenance if the forklift will be used for continuous heavy operations.
Forklift Operator – the rental company will only provide you the lease if you have licensed or certified operators.
Location – depending on the city, prices may be different due to cost of living and effects of inflation. You would also need to consider the environment the lifts will be operating on.
Mode of Lease – when we say mode of lease, this is your main financier. You can finance leases through equipment companies or banks.
What Else You Need to Know
Aside from operation and capital lease, here are some other lease plans that the company may offer:
Full maintenance lease – this type of lease is the usual lease given out to construction firms. They account a certain amount of yearly maintenance costs on the equipment and divide it into the monthly payments.
Skip Payment Lease – there are some jobs that will be seasonal, this lease gives you the liberty of paying the leasing company when your work starts piling up. There can be a total of 3 skip payments per year.
Tax calculations are done yearly as well for your business. If you buy a forklift, it will be considered as part of your capital wherein tax charges may be higher. If you lease a forklift, this will count as expenses on your ledgers and tax will significantly decrease. You can check out business tax information on All Business.
At the end of your lease term, you can have the equipment replaced with new ones. Leasing avoids obsolescence.