Thursday 27th Oct 2016 - Logistics Manager

Lease or purchase?

Jungheinrich UK’s sales director, Bill Goodwin, says: “The UK has certainly led Europe in the development of contract hire and we’re generally seen to be about five years ahead of the rest of Europe in this area. That UK level of 65% of trucks acquired on contract hire, compares with 40-50% in France; 20-30% in Germany and only around 5% in eastern Europe. So the real increase in contract hire will occur elsewhere in Europe as industry comes to recognise the benefits of this method of acquisition, as corporate funding models develop, economies mature and old fleets come up for renewal in the former state industries of central and eastern Europe.”

He believes the option to finance or purchase relates more to industry sector than fleet size. It also depends on individual companies’ corporate funding models: some large retailers purchase their fleets, while others resort to contract hire. The annual increase in Jungheinrich customers opting for finance packages rather than purchase remains constant in the UK, the level of rented trucks remains between 60-70% – far higher than anywhere else in Europe. This level relates to truck volume as opposed to truck orders.

Andrew Morley, national sales manager at Toyota Industrial Equipment, adds: “Typically companies with more that ten-plus units in operation have contract hired, whereas those with one to nine units in operation have continued to purchase. Fleet size has historically been an important factor in influencing the rental or purchase decision by both small and large operators but with the recent amendments in UK Accounting legislation and the influences of US and European GAP Accounting Standards, there has been a revision and trend for larger operations to reconsider ownership rather than lease/contract rental. “The influences of further legislative accounting standards being made in 2006 may impact on longer term leases of six years plus.”

According to Roger Massey, Barloworld Handling marketing executive, about 70% of trucks are acquired through some kind of finance agreement. “Fleet purchase is more popular amongst companies operating small fleets – one or two trucks – or when purchasing pre-owned equipment. The capital investment required in this scenario is less and small businesses often prefer to have total ownership of their assets. Low cost is the most attractive benefit of finance to most companies since you are only funding the use of the asset and the depreciation over the term of the contract.”

Translift Bendi’s Simon Brown says: “We offer short term/casual which is week to week, lease purchase & contract hire over two to seven years with five years being the most popular. Our hire volume tends to remain constant at a lower than industry average as often a Bendi is part of a larger change in the business direction and we end up getting bundled as part of the change which is block financed. Our ratio is therefore 60:40 finance to purchase. Also our figures are distorted by selling to other manufactures and dealers who will in turn contract hire to their customers.

So what finance packages are offered by the FLT manufacturers?

  • Jungheinrich offers a wide range of financial solutions to assist customers with their truck hire or purchase requirements, and can discuss specific options tailored to meet customers’ individual requirements. Principal packages focus on: lease purchase, where the title of the truck passes from Jungheinrich Finance to the customer at the end of the agreement, leaving cash within the business and offering the customer an additional credit line; contract hire, offering a minimum term lease agreement with payment for use of the equipment rather than its ownership.
  • Still has the PartnerPlan system of building blocks where the specifier selects one of several options from each of five operational segments: Products, Finance, Contract Duration, Service and Intralogistics, to arrive at a made-to-measure solution to meet his needs, from a simple hand pallet truck to a fully-designed and installed warehouse. A major benefit of the concept is the ability to play ‘what if?’ during the planning stages.
  • Toyota and its regional distributor network provide flexible contract rental packages that enable fleet procurement to be established on a continuing basis using a single contract. This includes the ability to increase fleet size and even vary equipment types if the application changes, without signing new contracts.
  • Barloworld Fleet Rentals offer sa comprehensive range of tailored finance packages. Typical finance options are: operating lease, contract hire; sale and lease back; and finance lease.
  • Translift offers short term/casual which is week to week, lease purchase & contract hire over two to seven years, with five years being the most popular.