Forklift Lead Times
Since Covid began, extended lead times on forklifts have been an issue for equipment buyers, and most customers are aware it’s a problem. Unfortunately, the situation has gotten worse. Supply Chain disruption, overseas shipping backlogs, and availability of components, especially internal combustion engines, have contributed to the issue. The time from order to delivery has increased to beyond a year for certain models. As this is expected to continue, you must modify and adapt your planning.
Why are forklift lead times so long?
The shortage in new forklift availability has now led to a lack of used forklifts and short-term rental units. Your typical options have been, if I can’t get new, I’ll look for used, and if I can’t get used, I’ll get a rental. Not today. Most rental fleets are experiencing near 100% utilization. By the way, all this pressure on the supply of forklifts is also driving up prices, which is predicted to continue.
As it applies to leases, your Lease Expiration Date is much more critical than it ever has been. Fair Market Value Leases, where you have planned replacement, have been a popular financial vehicle for forklift acquisition. You get a lower monthly rate, versus a purchase, for the use of your forklift(s). Options at the end of your lease term are:
- Replace with a new forklift Lease on a new term
- Continue to rent on a month-to-month basis
- Sign for an extension
- Purchase the unit as used
Typically, when you replace your existing forklift lease with a new forklift lease, your forklift vendor takes the returned unit, and either uses it as a short-term rental or sells it to someone else, as used, at the current market price.
Prior to Covid, when Forklift supply was plentiful and prices were flat, extensions were being offered at the current lease rate or lower, not anymore. Beware that at the end of the lease, if your replacement hasn’t been ordered and received in time, you could be subject to an extension increase or a “month to month” rate increase.
Prior to Covid used forklifts were easy to find, and prices were flat so you could get a relative bargain on the purchase, not anymore. Beware that the market value of used forklifts has sharply increased, and you could end up paying the price almost as high as it was when it was new five years ago.
So, depending on your purchasing process, you should be planning your replacement 12-18 months in advance to avoid an ugly surprise. If you lock in now or at least well in advance, most vendors will secure your price and lease rate. This way, if prices and interest rates continue to increase, you will avoid paying more next year. Expect the current price to be higher but know the forecast is for continued inflation.
It may be unpleasant to hear, but unfortunately, that’s the way it is. If you’re in business, I’m sure you have experienced similar circumstances in your industry, or maybe worse.
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