Is It Time to Buy a Forklift?

Capital investments - the purchase of items that boost productivity and cost more than $5,000 - are part of every company's solid financial budget. Capital investments, such as material handling equipment like forklifts, are expected to show a positive ROI, or return on investment, almost immediately - or at least by the following year.

Companies that are planning on growing - or are already showing positive growth - need to be able to make decisions about capital investments and how the ROI is going to affect the bottom line. Do you anticipate your company growing faster with the addition of a forklift? Adding capital investments in the form of equipment such as a forklift can not only boost your productivity, it can help you increase your workforce and expand your business into new markets.

Let's take a look at some of the signs that buying a forklift would be the right choice for your company. 

Funding Growth

In a broad sense, possessing assets like forklifts and other material handling equipment will help you if you need to borrow money. Purchasing a forklift - or any capital investment - provides your company with several advantages you won't find with rental or lease programs. Just like other assets your company owns, equipment can be used as collateral to fund growth capital - money used specifically to advance growth.

Growth funding is used to take a company to the next level. More equipment leads to more workers which leads to faster throughput giving you an increased competitive edge and opening new markets. Growth funding is one way a company can move faster after it has proven it has the income and financing to maintain daily operations. Possessing fixed assets such as forklifts, aerial equipment and other material handling equipment can show a company is more investable.

Having a stable company is advised before moving into purchases such as forklifts, which brings us to the next sign that it's time to take a look at buying a forklift. 

In It For The Long Haul 

There are attractive reasons for choosing to use a rental or lease program when looking at acquiring a forklift. Renting may make more sense to the bottom line, especially if a company is starting out. When you've reached a point where you know you can use a forklift on a daily basis for more than two or three hours per day for years, it's time to look at investing in a purchase. Why is a purchase better than renting or leasing?

As mentioned before, capital assets can help your company grow in different ways

With ownership, you are paying yourself and your company instead of another company

Over time, you will pay more for the same piece of equipment when you rent

You can make adjustments or changes to your forklift if you own it

Overall, once your company has reached a stage where it's financially stable and growing, it's time to look at purchasing your capital assets, rather than renting them.

Best Time To Purchase 

It's an annual event that every well-run company has to go through - coming up with a short-term financial plan or budget for the next year. Many companies have long-term goals, as well, that need tweaking on an annual basis. Purchasing expensive Large expenditures, such as a forklifts, should be in both categories, of course. Is there actually a better time of the year to purchase a forklift? It depends on your business and your business model.

If your business is seasonal and has an uptick in hours and demand at certain times, you'll want to purchase your new forklift in plenty of time for training. For example, if your material handling warehouse carries a lot of Christmas holiday items, you should look at October, at the latest. It's always a good idea to give yourself and your employees time to train and get to know the forklift. Similarly, if your business caters to outdoor activities, you'll want to look at purchasing right after the new year - although you can get a pretty nice tax break under certain circumstances if you buy before the end of the year (more about that later).

It goes without saying that you've done plenty of research into the various models of forklifts and the companies that sell them. It also helps to understand that you are not the only one looking - sometimes there can be a wait for a new forklift which needs to be a factor in your planning. A large number of companies do their purchasing at the beginning of the year, others wait for the end. When you purchase your forklift depends entirely on your company's needs and financial forecast. 

Trading Up 

So far, we've mainly talked about first-time forklift purchasers. But what if you already own a forklift? When is the optimum time to trade it in for a newer model? Again, it comes down to your specific circumstances, but some general guidelines include:

Hours: The industry standard for the life of a forklift is 10,000 hours. There are many variables that can alter this number, including how the forklift has been cared for and how the forklift has been used. Generally speaking though, if your current forklift is going to be used for a trade-in, you'll want to do that before the 10,000 hour mark. Again, making sure your equipment is cared for properly can go a long way toward increasing trade-in value. Are you using an equipment checklist prior to each shift? Asking employees to check the forklift before each shift can help to remind them that you care about your equipment - and their safety.

Maintenance: All equipment has a tenable life span. How long something lasts depends a lot on how it was taken care of and the conditions under which it has been operated. You wouldn't expect a forklift working in rugged outdoor conditions in Alaska to last as long as the same forklift that operates on a well-paved yard in California. Sure, having a regular maintenance schedule that is strictly followed and operators who value the equipment will help prolong the forklift's lifespan. But, eventually, you may find yourself facing constant repairs on your forklift. When the repair costs start to look like they will exceed the forklift resale value, it's time to trade.

Always take good care of your expensive equipment. When it's time to trade in your used forklift for a shiny new model, you'll want to be able to show that the equipment has been cared for and serviced on a regular schedule. We've touched on forklift hours and how that can affect the machine's value. If you do plan on using an old forklift as a trade-in, you'll need to do that before it reaches 10,000 hours or 10 years. 

Getting A (Tax) Break 

Many small to medium companies take advantage of Section 179 deduction of the U.S. tax code. Briefly, the inception of section 179 was designed to encourage businesses to invest in purchases that help grow their businesses. If you plan on purchasing a new or used forklift in 2021, you might find that Section 179 can help you. There are limits on how much a company must spend and when the maximum amount spent is capped for the deduction. You can find more information on Section 179 and how it could work for you here. Always check with your tax professional to maximize your benefits. 

At Southwest Materials Handling Co., our knowledgeable staff can help you determine the appropriate time to buy a new or used forklift. We've got plenty of new and used models to choose from to help maximize your specific and unique challenges. Contact us today.