Lift Trucks: Be sure the lease fits
Changing business conditions are encouraging customers to demand customized lease agreements.
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Leasing can be a good way for lift truck customers to manage the total cost of a truck and keep up with new technology. That said, a lease too short, too long or too inflexible can still result in waste.
According to Eric Gabriel, manager of financial merchandising and sales operation for Mitsubishi Caterpillar Forklift America Inc. (MCFA), customers and lift truck providers must design customer-specific lease agreements with a detailed understanding of usage and objectives.
“The most critical aspect to leasing is understanding the economic life of a lift truck,” says Gabriel. “All equipment has an economic life, so you should tailor the lease to reflect that and have replacement at the precise point that maintenance costs surpass replacement costs.”
To find that precise point, an ideal lease should consider the ” title=“type of truck, the application and the hours of use”>type of truck, the application and the hours of use, among other factors. Gabriel warns against standard, off-the-shelf terms of 36, 48 or 60 months.
“Do not get locked into those intervals,” says Gabriel. “If you’re in a low-hour application, that calls for a longer term. The more intense the application, the shorter the term. And, depending on your exact hours of use, 32 months might make more sense than 36.”
And although contracts extend into an unpredictable future, leases can include a certain amount of flexibility as conditions change. The structure of lease agreements has been changing subtly for years, says Gabriel, but the recent recession has had a significant impact on the expectations of customers and the fine print that can meet those expectations.
“During a recession, customers tend to hold onto fleets longer than they should,” says Gabriel. “That trend is changing now, there’s been pent up demand.”
After extending lease agreements by necessity, many customers ended up pushing trucks beyond their economic life, he says, but they might also have learned useful information about utilization.
“After stretching those trucks, customers might have realized they were under-utilizing them and can go from, say, 10 trucks to eight,” says Gabriel. “Managers are now looking at being proactive, not reactive.”
About the AuthorJosh Bond, Contributing Editor Josh Bond is Senior Editor for Modern, and was formerly Modern’s lift truck columnist and associate editor. He has a degree in Journalism from Keene State College and has studied business management at Franklin Pierce University.
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