Using material handling equipment on lease is quite popular. But when the lease on the equipment is ending, many business managers consider whether to continue using their old equipment by extending the lease or to investing in new trucks.
The fact is, there’s no one fit-for-all answer to this question. It depends on the organization and its operation as to which is a better option between the two. Let’s find out.
Keeping Old Equipment
Keeping old equipment or buying/leasing used equipment has its perks. These are:
Purchasing a new truck or rather a fleet of trucks is a significant amount of investment that you incur. That amount spent on a new piece of equipment could easily be equivalent to the cost of two or more used trucks, depending on market conditions. Moreover, you could use that extra money on additional gear, attachments, or maintenance of your current equipment.
New material handling equipment such as trucks tend to significantly depreciate in value in the initial stages. The initial depreciation could amount to 20 to 40 % in the first one year. Using old equipment or trucks will help you avoid that depreciation. Moreover, old equipment can hold its value if it is maintained properly. Thus, following a regular maintenance schedule, and documenting each service and repair will be helpful in getting a good value when you sell your old equipment to future buyers.
Using old or used equipment gives you a good level of flexibility in your operation. If you need a specific type of equipment for a certain amount of time, you can lease it with a short term contract. This way, you can acquire your trucks quickly and dispose of them with equal ease and speed. Purchasing new equipment won’t give you this level of flexibility. Investing in new equipment also results in a loss of value till the time you sell it.
Investing in New Equipment
Buying new equipment also has its benefits. Depending on the needs of the organization, this can be the better idea. The benefits are:
With technological advancements, newer trucks are always evolving and improving compared to their predecessors. Manufacturers are continuously analysing market needs to figure out the design improvements that they can bring in new products. Hence, they are upgrading new models with better features and functionalities. So investing in new equipment can make them more efficient for your operation.
Besides, new trucks come with better ergonomics. For instance, things like the step-in height of a truck or its steering wheel position may be streamlined in newer models for better ergonomic conditions of operators.
Developments in battery technology and enhancements by manufacturers often result in more power efficient machines. Thus, modern equipment consumes much lesser power as compared to older models from the past. The cost of these newer models may be higher but you could cover that extra cost by energy savings throughout the life of the truck.
Thus, after analyzing the pros and cons of each, you must decide whether which option is better between using old trucks or investing in new ones. To know more learn here.