Financing your forklift fleet

Strategies for optimum cost, effect, and control of materials handling assets

Materials handling companies and logistics operators face volatile demand, along with rising operating and technology costs, and pressure to maximise uptime. Funding has moved beyond a simple choice of buying or renting. Ruari McCallion finds that flexibility, data, and early involvement by financial sources have become central to fleet management.

(Summary)

It’s nearly 20 years since the ‘credit crunch’ triggered a near-collapse in the global banking system. Things were so much simpler then, as the song had it; there is much less certainty now. Recent events like the Covid-19 outbreak, Ukraine war, and now the Iran conflict, have all contributed to reduced confidence. Government policies have added to costs in some countries across Europe, especially the UK. Economic downturns have had major impacts on even the biggest economies. Before the banking crash in 2008, asset financing was pretty binary: either you qualified for a loan to buy new equipment or you didn’t.

We have moved on from ‘take it or leave it’. The cost of a lift truck fleet is no longer about the price of the trucks alone. Service, uptime, telematics, collision avoidance, and other safety technologies, residual values, redeployment, and the ability to respond when customer demand shifts all have a material effect on the economics of an operation.

One size doesn’t fit all

Finance companies themselves have had to adopt a different, more proactive role. Rather than just look at the profit and loss accounts, finance providers increasingly need to help manufacturers, dealers and end users shape more bespoke solutions. One size doesn’t fit all and the financing companies have recognised and, in many cases, embraced the new reality. It’s a way of getting to know customers better and of developing longer-term, deeper relationships. From the financier’s point of view, a stronger relationship means that it’s no longer just about interest rates. From the fleet operator’s perspective, a closer and more personal relationship means better understanding and more flexibility – which is all to the good.

Outright ownership versus full-service leasing

Once usage and operational requirements are understood, the funding package can be designed to mirror them. High-intensity warehouse applications can see residual-value finance or rental enable regular replacement, which means regular access to current technology and a stronger service proposition.

“On the other hand, outright ownership may make more sense for durable equipment used for relatively few hours each year, where an operator can expect to retain the asset for a decade or more,” Lacey observes.

In high-usage situations especially, finance companies and dealers have seen the growth of ‘360-degree’ forklift fleet provision, which includes rental, servicing, maintenance, monitoring, repair, and replacement. This originally became widespread in the UK, likely due to the tax regime. In the past, outright capital purchases in the UK were written down against taxable profits over a five- or 10-year period. This made renting or leasing a more attractive proposition as rental payments are fully allowable and, being lower, placed less strain on cash flow. The UK now allows 100 percent write-down in year one of a capital acquisition in many circumstances, so that balance has shifted. However, the convenience and comprehensive support included in 360-degree contracts has continued to make them attractive. So much so that the approach has spread and is now commonplace across the EU.

Technologies and residuals

The price of the lease/rental solution is determined by the initial capital cost of the equipment and forecast residual value. The higher the value of initial cost the machinery retains after three years, five years, or whatever the length of the contract, the lower the payments will be. That seems obvious but it has a bearing on the role and value of some technology.

“Telematics, collision detection, or avoidance products, or the more sophisticated pedestrian detection equipment, could add in the neighbourhood of US $5,000 to the price of a forklift truck,” says Lacey.

Telematics now gives fleet managers a much clearer view of utilisation, operator behaviour, and maintenance needs. Its value extends beyond reporting: data can support decisions about fleet size, identify under-used assets, and help protect uptime. At the same time, collision-detection and pedestrian-protection systems are becoming a requirement in many fleet discussions rather than an optional extra. They offer value but they are not free. The role of the finance company is not just profit and loss; it can help operators differentiate between must-have and nice-to-have, and to understand the associated costs.

“These systems evolve more like software than traditional hardware. Their safety and operational value may be clear today, but a funder cannot assume the same technology will command a meaningful resale value in five years’ time,” Lacey explains. “That uncertainty adds pressure to residual-value calculations. It also strengthens the attraction of rental or leasing for customers who want the latest capability without carrying the full risk of technological obsolescence.”

Flexibility replaces rigidity

Flexibility is becoming one of the defining requirements of larger fleet customers, particularly third-party logistics providers and businesses operating across multiple sites and even different countries. If a contract ends or volumes fall at one site, an operator may want to move surplus trucks to another facility rather than continue paying for assets it no longer needs.

Lessors have to balance that need against the payment stream and residual assumptions agreed at the outset. Redeployment within the customer’s own network, within the same country, is usually the simplest outcome but it’s not the only one.

“One of the things we’ve done at DLL is to develop a global ‘master lease’ agreement, in order to service these much larger customers and international clients, who want ease of process. They don’t want to be bogged down with, say, five requirements in the UK and 10 others in France,” Lacey explains. “So, we try to ‘lean’ it all out. We have one set of terms and conditions. Each country will have a schedule document where the equipment gets documented, which will contain whatever business requirements are for that country, but it brings a much, much more streamlined path to facilitating the business.”

This does not signal open-ended flexibility. Large customers increasingly want a repeatable model across Europe and, in some cases, North America, but contracts still need standards and clear commercial limits. Once an operator has defined the required equipment, annual hours, and service expectations, finance can be designed around the application rather than national habits about ownership. The aim is to spare an international customer from renegotiating the entire legal framework every time it acquires equipment in another territory.

Pre-loved has value

A stronger second-hand market is part of the residual-value equation and not everyone in DLL’s customer base wants a brand-new truck, every time. Top-tier, intensive warehouse users may continue to prefer new equipment because of uptime demands and the value of current technology. Refurbished trucks can suit lower-use applications, such as occasional work in a yard, while allowing operators to reserve new assets for the most demanding parts of the operation.

Closer relationships last longer

The biggest change since the global banking crisis is not a single product but a change in role. Today, Kevin Lacey argues, finance companies are increasingly involved in the strategic development of a deal and in relationships intended to last five or 10 years. He urges dealers and manufacturers to involve their finance partner early.

“I don’t want the day we are signing a $2 million contract to be the first time I meet the Chief Finance Officer,” he says. “The equipment specialist understands the application; the finance specialist can sit down with a CFO, controller, or treasurer, identify the business’ priorities and recognise opportunities to structure the transaction appropriately. Bringing those perspectives together before the proposal is signed can produce a better commercial and operational result.”

Trust is essential when transactions run into millions of dollars, pounds, or Euros. It’s difficult to establish trust for the first time at the point of approval, and harder still to repair it once lost. For Kevin Lacey and DLL, this is the clearest expression of finance as a service: not simply supplying money, but helping OEMs, dealers and customers develop, deploy and secure the opportunity.

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