Short-Term vs. Long-Term Forklift Rentals: Which Is Best for Your Business?

Making Sense of Forklift Rental Terms

By their nature, most distribution companies fluctuate in how busy they are across a given year, scaling up or down as their customers’ demands dictate. Similar businesses such as manufacturing, construction, and event-based companies experience these same business cycles as orders and projects turn over. In all cases, varying business demands can be quite difficult to work around, as quickly adding or subtracting capacity involves balancing money, people, and equipment. Some of these cycles are unexpected and short-lived, whereas others are predictable and last longer, compounding the problem.

Luckily, most companies can address the equipment constraints caused by these variable cycles by leveraging heavy equipment rentals, filling the gap in an economical and easily accessible fashion. Once a company decides to incorporate rental equipment into their overall fleet management strategy, one of the next decisions needed is selecting between short- and long-term rental terms. While many organizations will choose simply based on how long their peak seasons last, there are a few more details worth considering before locking in a rental term, as we’ll help explain below.

Before we get into the specific differences between short- and long-term forklift rental terms, let’s cover the common benefits that rental equipment offers to a business regardless of duration:

• Immediate Scalability – rental forklifts allow businesses to scale operations quickly during demand booms, ensuring that the business has the equipment necessary to productively cover their needs without laying out cash for new equipment purchases or ending up with under-utilized equipment after the boom passes.

• Flexibility – rental equipment offers business owners greater fleet flexibility over purchasing new units outright, including the ability to quickly add or drop equipment counts, swap out lifts for changing needs, and adjust quantities and terms as demand shifts.

• Special Capabilities – in a way, renting forklifts provide a business with access to a vendor’s entire fleet of specialized lift trucks, attachments, and feature sets without committing to just one choice permanently. In this way, businesses can pull in specific models and technologies for ad-hoc tasks at their discretion.

• Cost-Effective Solution – as far as cash is concerned, renting forklifts trades cash liquidity for a small price premium, which is the most cash-conscious decision to make in the face of variable, intermittent demand spikes.

Weighing Your Options between Long-Term and Short-Term Rentals

Above we established the four main benefits of rental forklifts, which can be boiled down to a low-cost, commitment-free way to handle incidental demand swells. Once your business acknowledges that rental equipment is the way to go for its specific needs, you’ll need to understand the difference between long-term and short-term forklift rental durations, as we’ll lay out next.

The Strategy of Choosing Forklift Rental Durations

Our goal with the above table is to softly introduce you to the high-level differences between long- and short-term forklift rental engagements, floating out key terms and risks that we can build upon. Next, let’s use these building blocks to construct a solid, complete strategy for selecting forklift rental durations.

• Cost Predictability – selecting between forklift rental durations is in large part a matter of locking in expense costs so that they will be predictable, even if slightly higher than they could be with longer terms. All else equal, day rates are usually the most expensive and annual rates are the least expensive. As such, businesses should select the longest rental terms that provide cost predictability within the timeframe of their upcoming demand boom, but not so long that they risk committing well beyond the boom’s potential end.

• Break-Even Points – another way to decide on forklift rental durations is to consider the break-even points between different rental terms. For example, a day-rate term may break even with a weekly term on day number 3, driving the business to select a weekly rate even though they only need the rental forklift for four days. This concept becomes even more important when looking at lift transportation, as the cost of multiple lift deliveries may break even with a longer term (and leaving the lift unused at times).
• Tax Considerations – rental costs are typically considered to be business expenses, which effect a company’s taxes much differently than asset depreciation (IE, owned forklifts). Different states handle rental (and lease) taxes in different ways, any of which may steer a company towards different rental terms as a function of paying lower overall rental expenses. As an added layer, service companies and contractors that rent lifts as part of a project sold to an end-user should discuss these implications with their clients to arrive at the best decisions.

• Pre-Purchase Testing – sometimes, companies want to try out the latest and greatest toys on the market, and rental equipment is a surefire way to do so with next-to-no strings attached. For this reason, companies may choose shorter or longer terms to give themselves either more frequent equipment swaps or longer trial time, respectively.

• Peace of Mind – at the end of the day, many companies may choose longer rental terms simply to gain invaluable peace of mind knowing that they have a rental lift ready to go if and when they need it. With this strategy, renters can ensure that they are covered should a demand boom arise and will commit to longer rental durations so that they have one less thing to worry about.

Seeking Transparency in Negotiating Forklift Rental Durations

To overly simplify the difference between long- and short-term forklift rentals, let’s pare things down to cost. In short, long-term rental durations lock in the most aggressive price point, whereas short-term rental durations charge a noticeably higher price point. Why?

From the rental vendor’s perspective, long-term rental durations bring in consistent, dependable income, which is attractive for cashflows and is rewarded as such. On the other hand, short-term rental durations take more work and are more sporadic, requiring surplus lifts to sit in the yard unbilled awaiting the next rental, which justifies a cost premium when they are rented.

This cost trade-off is very important for renters to understand, as it will help vendors and customers work together transparently to balance each other’s needs when negotiating rental durations. Customers will know that there’s a cost premium associated with convenience, and vendors will know that there’s a cost savings associated with repeatable income. Now that both parties know where the other is coming from, the rest of the details and their associated cost-to-benefit values can be easily sorted out to everyone’s satisfaction.