Forklift Leasing – Everything You Needed To Know [2019 update]
So You decided to lease a forklift? Forklift leasing has its benefits. However, leasing a forklift is not suitable for every business. Many businesses would benefit more forklift rental.
In this guide, we will review the forklift leasing options, lease terms, forklift leasing cost, forklift lease maintenance issues and much more.
There are still many advantages to leasing a forklift such as lower monthly payments, and fixed financing. Leasing a forklift means that your company will consistently have access to and be replaced with newer models.
Finally, leases only charge you for the amount of time the forklift was used. While leasing has its pros, it also has a few cons such as interest costs eventually outweighing the cost of ownership and binding contracts for set terms and time.
Forklift Leasing Options
There are essentially four types of leasing options. Those are operating lease, capital lease, one pay lease and finally a flex lease.
The Operating Lease
This type of lease offers special off the balance sheet financing. This type of lease has interesting tax advantages due to the structure of the lease.
Every business should ask their accounting advisor or CPA before entering such a lease.
One Pay Lease
This lease is suitable for firms that are financially sound. The lease involves making a single payment in advance. This payment is quite large and it mimics an outright purchase of a forklift.
The difference between a one pay lease and forklift purchase is that the firm leasing the equipment is still responsible for maintenance of the forklift unit.
Additionally, the forklift may be returned at the end of the lease term. Hence, the cost is slightly less than an outright purchase of a forklift. Finally, this option will save the business thousands on interest charges.
Capital Lease
The capital lease offers the ability to purchase the unit at the end of the term for a nominal amount. Those types of leases tend to be more aggressive in price since.
The reason behind that is that the manufacturer believes the business tend to preserve the unit over the course of the lease since it is going to purchase it.
Flex Lease
The flex lease is the most hybrid type of forklift leasing. It offers many payment options and lease terms-shorter or longer. Under this type of lease, the business may return the forklift sooner or later.
Forklift Lease Terms
Lease terms vary by which structure is chosen and depends on the utilization and operation of the machine. Standard leases for equipment can be found on Google.
In the meantime, here are some important questions to ask:
- Will the equipment be delivered? When will it be delivered? How will it be delivered?
- Do you provide service for my forklift rental? What is the recommended maintenance? Is there a number to call for maintenance? Is there a number to call for customer service?
- Who is responsible for any damage? Can you outline how I should proceed if a collision occurs?
- Does your company offer rental insurance for the forklift? What are the qualifications needed to operate a forklift?
When filling out your lease, be careful to note the fine print that every contract has: “Plus all applicable taxes. Subject to credit approval and all terms of lease agreement.
Forklift Leasing Prices are based on 60 month FMV lease; clean working environment additional conditions will apply.”
These small words add money to the bottom line of your bill. Take them into account.
Lease Terms in Plain English
- Always negotiate the capitalized cost - Negotiate for your lowest price possible. Your lowest purchase price equates to your lowest monthly lease payment.
- Depreciation - Your forklift will decrease in value while you are renting it out.
- Term - The term is how long you will be renting the forklift.
- Lessee - This is you.
- Lessor - This is the company leasing you your forklift.
- The security deposit or down payment - This deposit is used in case you damage your forklift during your rental period.
Reading The Fine Print On Lease Agreement
When leasing a forklift, be sure to read the entire contract and be sure to keep a copy for your files. A forklift equipment lease should include your name, dates of the rental, any rent installments or payments, any security deposits, and any prorated dates.
Furthermore, your forklift lease should include a clause about the use of the equipment aligning with laws about regulation and management.
In addition, the forklift lease should provide a sublease clause which allows you to rent the equipment out to others.
The forklift lease will also explain that you as the lessee of the equipment are responsible for keeping the piece of equipment in working order and that you will contact the lessor (leasing company) if any work orders or maintenance needs to be completed during your lease period.
The next section covered by the lease includes a clause about risks such as loss or damage to the forklift. In summary, this section explains that if damage is sustained or loss of the equipment occurs, you as the lessee must replace the equipment in good condition or pay the full cost of the equipment.
Additional Leasing Terms
The second significant section of an equipment lease for a forklift normally covers the end of the lease when you will return the forklift to the lessor company.
When the lease expires or when you return the equipment, the forklift must be returned in good repair and working order.
The Forklift Delivery Expense
Pay careful attention to where you need to deliver the equipment and check to see if the items need to be delivered at your expense. In this section, you will also notice clauses about risk insurance for the equipment. This insurance must meet with the lessor's standards and provide coverage and protection.
Insurance Cover When Leasing A Forklift
You must also have a policy number or certificate to show your insurance coverage before your lease can take place. In addition, if there are any changes to your insurance policy while the lease is active, you must immediately notify the leasing company.
Non- Transferable Forklift Lease
Any liabilities for the lessee need to be paid before the equipment is returned and you will also need to make payments on time to the forklift leasing company.
The next clause explains the penalties of not paying your lease payment on time and may include the forklift rental company’s right to sue, right to terminate the lease, or the right to pursue any remedy to the situation via the proper legal resources. In addition, this clause explains that your forklift lease will not be transferable.
The forklift contract will also explain that you have no rights to the equipment except for those the company explains in the lease. The last portion of the lease explains that you agree to the terms of the lease and you will abide by them at all times.