Making material handling decisions

Rent or buy: that is the new material handling equipment question

Leasing, rather than buying capital assets that depreciate is increasingly making more and more business sense. And nowhere is the trend of renting equipment becoming more noticeable as a smart move in an uncertain economy than in the material handling equipment market.

Bianca Smit (left), National Operations Manager at CFAO Equipment SA, says some big companies that were historically cash customers have swung to renting material handling equipment as they want to “pay for use, not for ownership”.

 “These companies don't want their material handling equipment to become a liability,” she says adding that a decision to lease also helps companies avoid the stress attached to the disposal of old equipment.  

Smit says a small business that moves goods occasionally will do better to buy a machine for cash, as the useful life of the asset will far exceed the general five-year cycle due to low utilisation. But a company that wants to retain its cash for its core business would do well to rent material handling equipment especially if the warehouse or factory demand goods to be moved around all the time. 

The capital required to buy equipment makes rental an easier choice as there are far lower upfront costs. A purchase converts your fluid cash into a fixed asset. This can weaken your company’s financial position and banks or investors can view this negatively.

On the other hand, the flexibility that rental offers, where you are not saddled with a depreciating asset forever, is more suited to South Africa’s economical volatility. In addition, as company’s needs change and expand, the option of moving from a diesel-powered forklift to electric is easily available.

One of the benefits of renting is that the uptime of a customer’s fleet remains uninterrupted if there is a major breakdown, as a replacement machine will be made available from the short term rental fleet.

Smit adds that rental equipment may be swapped under certain circumstances, such as when customers require a strategic shift from internal combustion to electric operated equipment. This flexibility is not available to a cash buyer.

“As a business that is cognisant of change in the market, CFAO Equipment SA offers short-and long-term rental agreements across our diverse range of material handling equipment. These vary from hourly or one-day short-term rentals up to 72-month long term rental agreements to tailor a handling solution to suit the customer,” says Smit.

For seasonal demands, CFAO Equipment SA through its Toyota Material Handling division offers a seasonal and short-term lease option. When there is high demand for equipment, such as during the December and Easter festive periods, you simply rent, without the bother of having equipment purchased for cash lying idle when there is low demand,” says Smit. “CFAO Equipment SA has a great variety of equipment in its rental fleet, and this can also be supported with machinery from the purchase stock pool.”

“The Toyota Material Handling division was the first worldwide distributor to offer and supply rental agreements on material handling equipment. It has extensive industry experience and is aware of what its customers need in order to increase output and decrease downtime,” Smit adds.

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