When it comes to acquiring new equipment for a business, a common concern is cost-effectiveness. After all, this decision can greatly impact the business’s cash flow, operational flexibility, and long-term financial planning. Thus, the question that many business owners ask themselves when it comes to equipment acquisition is: “Should we buy or rent?”
This dilemma is often encountered by business owners in need of a forklift for their warehouse. While a forklift can certainly be a worthwhile investment if it can be utilised to the fullest, a forklift for rent can also prove to be a better option depending on the situation and financial means of the business owner.
To help you make a financially sound decision for your own business, here are some associated costs to either buying and renting forklifts that you should take into consideration first:
1. Upfront Purchase Price
Forklifts are significant investments. Thus, when evaluating whether to purchase or rent one, your first consideration should be about the upfront purchase price of the forklift model your business requires. Check with suppliers for updated prices and evaluate your business’s current financial capacity. If investing capital in buying a forklift can be done without compromising any other part of your operations, then purchasing can be a good choice.
Financing is also another option if you have the means to pay for the forklift but would rather spread out its cost, so you don’t stretch your budget too thin. If you’re taking this approach, however, do keep in mind that the interest rate of the financing terms can also add up over time.
2. Rental Fees
Perhaps upon checking the prices of forklifts with your supplier, you realise that your business isn’t in a good position to shell out such a huge amount. In that case, renting can be a cost-effective alternative for you. That said, while the upfront costs of renting a forklift is significantly lower than buying one, do note that rental rates can still vary greatly depending on factors such as duration, forklift type, and capacity.
In addition, keep in mind that long-term rentals can eventually become more expensive than owning, especially for businesses with frequent forklift needs. Therefore, it’s crucial to evaluate first how often you expect to use the forklift. If you have sporadic or project-based needs, then renting a forklift is ideal. If you expect daily or long-term use, however, then purchasing may be the better option.
3. Maintenance and Repair Costs
Both buying and renting a forklift can incur maintenance and repair costs, though on different levels. When you purchase a forklift, you should also be financially prepared to attend to its regular maintenance such as oil changes, battery checks for electric models, or tyre replacements to keep it in top condition. The older the equipment is, the more costly its maintenance and repairs can be, so make sure to take this into account as well before purchasing.
As for forklift rentals, most rental agreements include basic maintenance such as regular servicing and wear-and-tear repairs. This alleviates the burden of maintenance costs on your part. However, if the forklift is damaged due to improper use, you may be held liable to pay for its repair costs in full, which could negate some of your savings.
4. Depreciation
Forklifts lose value over time as newer, more efficient models get introduced to the market. A forklift purchased today may have limited resale value in a few years, so you must carefully consider its long-term return on investment before purchasing one.
Meanwhile, depreciation isn’t something you have to worry about if you’re just renting a forklift. Rather, this consideration is the rental company’s responsibility, allowing renters to avoid the long-term loss in value associated with ownership.
5. Transportation and Delivery Charges
When renting a forklift, you should take into account delivery fees, which can vary by location and the distance from the rental company. Keep in mind that frequent transportation costs—especially if your businesses are renting forklifts across multiple warehouses—can increase your overall rental expense. While seemingly negligible compared to the upfront costs of buying, these can still add up to a significant amount over time, especially if you’re a long-term renter.
6. Scaling Needs
Buying forklifts requires planning for future operational growth, potentially leading to underutilised equipment if demand unexpectedly fluctuates. Meanwhile, if there is a sudden growth in demand, scaling up through buying more forklifts can prove to be an exorbitant expense.
On the other hand, renting allows businesses to quickly adjust their equipment inventory based on current demand without long-term commitments or upfront investments. Thus, if sudden changes in your business operations require the use of more forklifts, then it’s much more affordable to simply rent additional ones as opposed to purchasing them.
Deciding whether to buy or rent a forklift requires careful consideration of various costs and operational needs. It’s even possible that a hybrid option between the two—wherein you purchase limited forklifts only and rely on rentals if you ever need to scale up—can also work for your business. By going through the considerations discussed above, you can determine the most cost-effective option that aligns with your business goals and thus make a more informed decision whether to rent or buy.
James is the head of marketing at Tamoco
