Most material handling equipment dealers never expected to morph into something resembling a financial advisor. They provide the machine, not the means.
But times have changed. It's difficult to find a corporate manager exempt from the seemingly contradictory directives to reduce capital outlay while increasing operational effectiveness. Material handling professionals in all industry verticals must do more with less.
To preserve their own competitiveness, leading equipment dealers are crossing the line that once separated those who sell equipment from those who make equipment financially accessible.
Today, there are many ways to obtain lift trucks without desecrating the bottom line. The trick is sifting through the numerous solutions available. Although it's easy to find sources for renting, financing or leasing lift trucks these days, clear definitions of those concepts can be hard to come by, and now is not the time for guessing.
To help readers explore some of the unique financial deals available, MHM sat down with Mark Ciaburri, director of rental and used equipment at Abel Womack Inc., for an exclusive interview.
Abel Womack is a large material handling equipment dealer that primarily serves the northeastern U.S. However, as part of the nationwide Raymond dealer network, the lift truck provider has access to rental fleets throughout the country.
MHM: What trends are you seeing in lift truck procurement?
Ciaburri: Especially in this economy, our clients want to reduce risk, preserve capital and lower overall costs, but they still need equipment. Renting can be a good alternative to traditional procurement methods.
And, as larger companies make acquisitions, they consolidate warehouses, relocate parts of their businesses and create a demand for short-term rentals.
In addition, the range of lift truck specifications our customer base uses has become much larger, which requires us to have a larger and more diverse fleet.
MHM: Discuss some of the programs available, and explain how each addresses specific material handling requirements.
Ciaburri: Abel Womack offers short-term rentals, long-term rentals and a flexible leasing program called Flex-Lease. Short-term rental programs meet the needs of a material handling professional who needs additional lift trucks for a seasonal rush period or special project. Rentals are also a great way for a facility manager to “test drive” a particular lift truck model before purchasing it.
When equipment is needed for long periods of time, but seasonal needs or short client agreements don't justify long-term lease commitments, a long-term rental may be the way to go. Long-term rentals can save money over the cost of owning or leasing equipment that may not be needed after a period of time.
Another advantage to renting is that most rental programs include the cost of maintenance. A client receives a single invoice each month for both the equipment and maintenance coverage, and that can reduce administrative costs and streamline budgeting.
Unlike a traditional operating lease, our Flex-Lease program involves shorter commitments and the ability to exchange equipment as business requirements change. In most cases, monthly costs are lower when renting or leasing as compared to ownership. There are also tax and balance-sheet advantages to renting.
Flex-Lease may be a good option for a company that needs equipment for fewer than five years. While monthly rates are comparable to those of a traditional 60-month operating lease, the time commitment with Flex-Lease is shorter. In addition, customers can exchange equipment without early-return penalties.
MHM: When is renting more beneficial than purchasing?
Ciaburri: When companies need flexibility and overall cost reduction, rental and leasing programs can help. For example, a third-party logistics provider (3PL) signs a three-year contract with a customer, requiring additional facility space. With a standard five-year building lease, the 3PL is then at risk for the last two years of the contract. If the 3PL can get into a three-year equipment rental deal, it can save money, even if the monthly rate is at a slight premium. In cases like this, typically, rentals are accounted as costs and don't carry the balance-sheet or tax liability of financed equipment.
MHM: What advice can you offer end users as they consider their options?
Ciaburri: First, work with a reputable dealer that will find the right equipment to do the job as well as the best financial solution. Be prepared to spend time reviewing the options and be open to recommendations.
One of the most common mistakes companies make with equipment rentals is losing track of the term. Typically, it is the customer's responsibility to call off the rental, and if they don't, they keep getting a bill for the equipment. That's another reason to choose a reputable dealer. At Abel Womack, for example, we monitor short-term rental agreements that continue for longer than six months. That tells us the customer may be losing track, and we contact them.
My other advice is to partner with a dealership that has a very strong service organization. Ask dealers about their repair response times, first-time completion ratios and parts availability. And, another thing to keep in mind: While lift truck preventive maintenance and repairs due to normal wear and tear may be covered, typically, the end user has to pay for repairs caused by accidental damage. Many dealers have started offering insurance to cover that liability.