Leasing is a commonly used financing tool in the material handling industry for companies that want to preserve capital or don’t want the commitment of ownership. Whether you need flexible equipment options or the latest, state-of-the-art model, leasing can give you the opportunity to procure an entire fleet or just one unit.
But before you sign your lease, make sure you’re committing to the right lease for your business. Many forklift dealers offer a wide range of flexible financing and lease options to meet your needs. Just ask which options your local dealer has for you.
COMMON LEASE OPTIONS
Let's take a look at a few common lease options you might see.
FLEXIBLE TERM LEASE
- Permits you to lease for a specific initial term, with an option to renew lease for a second specific term at predetermined lease payments (and predetermined interest rate)
- Flexibility to terminate the lease at the end of the specified terms while locking in the monthly payments for the future
- Ability to match specific lease periods with the your contract commitments
- Ability to structure a program that will adjust to anticipated market fluctuations
Example: 24 month lease at $800/month, opportunity to extend lease for another 24 months at $200/month.*
CLOSED-END (OPERATING) LEASE
- You obtain the right to use the equipment acquired from Conger typically without the full cost of ownership
- Offers cash management flexibility in the structuring of lease payments
- Lease payments may be deductible for federal income tax purposes*
- Generous gap of 2000 operating hours, annually
- Requires operation in a clean environment (general warehouse, light manufacturing, finished wood applications)
Example: 60 month lease at $500/month.*
CAPITAL LEASE ($1.00 PURCHASE OPTION)
- Characteristics of a purchase agreement
- Provides for a purchase option at below-market price
- Alternative to cash and retail installment contract
- Ability to purchase equipment at the end of a lease for a nominal amount
- No penalties for severe operating conditions
- No overtime charges for high annual operating hours
- Ideal for severe operating conditions (cooler, refrigerator, freezer, heavy manufacturing, foundries, chemical plants, plastics, textile, humid environments, recycling)
Example: 60 month lease at $700/month with ability to purchase equipment at lease termination for $1.00.*
MASTER LEASE LINE OF CREDIT
- Lease line of credit for current and future equipment acquisition needs all under a single master lease agreement (applicable to Closed-End lease and Capital lease)
- Ability to make multiple purchases over an extended period of time
- Only one master lease agreement required
Example: Line of credit available up to $100,000.*
- Unique alternative if you have historically paid cash for your material handling equipment
- Reduced up-front cash investment
- Keep cash available to reinvest in other areas
- Keep current bank lines open
- Significant reduction in interest expense
- Eliminates processing of monthly invoices
- Take advantage of end of term options not available when owning a piece of equipment
Example: 60 month lease with yearly payments of $7,000.*
ADVANTAGES OF LEASING
There are several advantages to leasing your material handling equipment.
MAXIMIZE EQUIPMENT USE
You’ll have the opportunity to maximize your equipment usage typically without paying the full cost of ownership. Fixed lease terms and payments give you the ability to budget expenses and forecast fleet replacement cycles. At lease termination, simply return the equipment and replace it with new equipment. There’s no need to worry about selling or negotiating trade-in values.
Generally leases require little or no money due at signing compared to financing through a retail agreement. Your monthly lease payments will commonly be lower than a retail loan contract
CAPITAL BUDGET CONSTRAINTS
Leasing can give you an alternative to capital budget investments in order to obtain additional equipment.
FLEXIBILITY & CONVENIENCE
Leasing is a very flexible and convenient method of acquiring equipment to meet the ever changing needs of your business. Depending on your lease agreement, you have various option to purchase or renew for an additional term and your lease structure can be customized to meet your needs as well as give you additional flexibility.
Various tax benefits may apply for your leased equipment but you should consult your taz adviser for details.
If you aren’t sure that leasing the right option for your business, compare value of renting or purchasing in our comparison guide.
*All lease examples are merely examples and are assuming a $30,000 forklift to be operated 2,000 hours per year in a clean environment. Actual lease payments and terms are dependent on your application, credit, usage and current market rates