urchasing a used Forklifts
The market for used forklifts is presently very active. Good used forklifts often sell very quickly. But the decision around whether to buy new or used is also closely linked to the decision to purchase or lease. How are you best to consider the impact of the forklift costs, whether they be upfront or spread over time? And when is it best to opt for a good used vehicle over a new one? We consider the options.
Return on Investment
In most industries, a forklift will not provide a direct return on investment. Unless it is a chargeable part of your supply chain then it is likely to simply be a cost to your business. Thus, it can place your investment in alternative capital, machinery or resources that are going to make a direct and measurable return on that investment. Ask yourself: What is the most valuable investment in my supply chain? Where is my investment going to make the best return?
Owning vs Renting
The decision to own should only be made after carefully considering your cash position, the objectives of your shareholder, and the opportunity cost of your money. A rental option means that the full rental cost is a tax-deductible business expense, whilst owning means that you claim tax on the depreciation of the asset over its defined life. (Its life could be according to your internal accounting policy or according to the IRD-imposed depreciation rates).
If you do elect to own a used forklift (or a new one for that matter) then you can mitigate some of this mechanical risk by ensuring that you have a service programme in place with a reputable forklift supplier. Centra provides a robust Preventative Maintenance Programme for our customers. This is designed to ensure that through frequent, proactive servicing of your forklift you can minimise your risks around significant repair costs.
Now is a very good time to buy new. A strong NZD relative to our main trading partners makes new forklift pricing better than it has ever been.
The alternative, of course, is to rent on a short-term basis or lease on a fixed long-term basis. These alternatives give you certainty of costs. As because they generally include basic servicing as part of the contract. So, they will reduce your risks around downtime and repair costs.
New vs Used
When it comes to owning, certain businesses will carry a different risk exposure. This is subject to the demands on the forklift and the alternatives available. If you are heavily reliant on a single forklift as part of your business. Then owning will add significant risks if you encounter a serious breakdown. However, if you run a fleet of forklifts and therefore have a natural fail-over the risks may be minimal. These questions should also consider the number of hours the forklift will be operating. Hence, how demanding the application is on the forklift – generally. The greater the number of hours and the heavier the workload. Then the greater the potential exposure following mechanical failure. Under these circumstances, your business should consider buying or leasing a new forklift from a reputable supplier, and from a manufacturer with a proven track record of reliability.
Part 2 of this article next month will review the process to take once you have decided to buy a used unit, and what process you should follow before committing to the purchase.