Should I buy or rent a lift?
It seems every day a new logistics company is opening up, which means more and more warehouse work is becoming available for contractors. Whether that is new construction, upgraded lighting, new services or installing forklift charging stations. Whenever a warehouse job happens the most important piece of equipment for the electrical trade is the scissor lift. Some contractors own their lifts and some just rent them for each job, so which method makes more financial sense? In my experience there are benefits to both. Renting gives you the luxury of not having to maintain the equipment or move it from job to job. Owning may be a steep price up front but in the long run can make you a lot more money. Lets look into money side of both.
For math purposes lets assume that you have 6 jobs, each 2 months long one right after the other.
RENTING
Warehouses are getting bigger and bigger and the 19-25’ lifts that were common place 15 years ago are becoming more and more out of date. I found that the most common lift being rented for warehouse jobs now is the 32’ scissor lift, so we will look into that. I will be going off the rates I have personally received for renting this type of lift.
One day rental: $220
Week: $300
Month: $695
The added cost is $100 delivery of the lift and $100 for picking it up.
Going off our assumption that we have 6 jobs going 2 months each one after the other. That means that our rental fee for the year will be:
$695 x 12 = $8,340
We also have to include drop off and pick up fees:
Drop off fees: $100 x 6 = $600
Pick up fees: $100 x 6 = $600
That brings our total cost for the year to:
$8,340 + $600 + $600 = $9,540
This number may be slightly lower given that we are taking the lifts from one job to another so the company may waive the pick up fees which would save you about $500, but lets just assume worst case scenario that they will not waive their fees.
BUYING
Buying a lift can be a large upfront cost that many businesses are just not in the position to afford. There are other added costs when owning a lift such as maintenance (changing the batteries, fixing any issues that come up etc.) there is also transportation costs included as well, you will now need to move the lift from job to job yourself which can be a burden. There are a couple ways to combat the transportation issue that comes with owning a lift. The first one being you could buy a trailer and move the lift around yourself. I have also found in the past that some lift companies are willing to charge you their drop off and pick up fees of $100 dollars to move the lifts around for you. For the sake of the argument lets assume that we are going to be completely independent from the rental companies and that we are going to move the lifts ourselves.
When we start to look into options of lifts available, we can look in two places, new lifts and used lifts. Some people would rather pay the extra money and get a guarantee that they are getting anew piece of equipment with no problems. Others would rather save the money and get something used. Lets look into both scenarios.
New lifts:
I have found that on average a new 32’ scissor lift costs anywhere from $20,000 to $30,000. So we will split the difference and for our math we will use $25,000 for the cost of the lift. We will also need a trailer for the lift. Trailers have a wide variety of options that you could choose from with a nice one costing you around $10,000 and a used one that gets the job done being as cheap as $1,000. Since there is no way of knowing which trailer you will choose and which one is the best for you we will use a budget number of $6,000. The last thing that we have to consider in our total cost is how much we will need to pay for insurance on the lift as well as getting the trailer a license plate. Since everyone’s situation is different we will use a budget number of $2,500 total. I believe that this is a high number for insurance and plates but it is better to guess high and be pleasantly surprised when the cost is lower than to guess low and have more expenses than you bargained for. We will also set aside $500 a year for new batteries as well as anything else we might need because of normal ware and tare. So we if run down our total cost again for the new lift it is:
Lift: $25,000
Trailer: $6,000
Other expenses: $2,500
Yearly cost: $500
Total cost: $34,000
Used lifts:
Our second option when owning our own lift is to buy a used lift. A used lift is similar to buying a used car, you don’t know how well the previous owner treated it and you have to take the dealers word for it when he tells you if there are any existing issues with the equipment. There is always risk involved when purchasing a used piece of equipment but if you buy from the right dealer you can limit that risk by getting a warranty. Used lifts come in all price ranges depending on a number of different factors, for this example we will again have to use a budget number for the price of the lift. In my experience used lift that is in good condition that doesn’t have a super high number of working hours on it is around $10,000. In my experience you can find a quality lift in good condition for less but we will figure on the higher side to be safe. We will still need the trailer as well as the miscellaneous expenses and the yearly cost when we figure the cost of this used lift. So our total comes out to:
Lift:$10,000
Trailer: $6,000
Other expenses: $2,500
Yearly cost: $500
Total: $19,000
Pay Back Period:
As I said before we are going to assume that we have a steady flow of jobs that we can move this lift to, meaning we don’t really have any downtime for the lift. If we go strictly by the monthly rate for lift rental ($695) we can figure out how quickly the purchased lifts will be paid off. Our yearly cost for this lift will be $695x12months = 8,340. We will again factor in the extra money it will cost for the lift company to drop off and pick up the equipment $1,200. That brings our total for the year to $8340 + $1,200= $9,540. So if we look at our new lift cost we will see that the total price for year 1 is $34,000. Each year we will factor in an additional $500 for expenses.
Year 1: $34,000 - $9,540 = $24,460 + $500 (yearly expenses) = $24,960
Year 2: $24,960 - $9,540 = $15,420 + $500 (yearly expenses) = $15,920
Year 3: $15,920 - $9,540 = $6,380 + $500 (yearly expenses) = $6,380
Year 4: $6,380 - $9,540 = -$3,160 + $500 (yearly expenses) = $2,660
So our pay back period is between 3-4 years, with the end of year 4 showing a $2,660 profit.
Lets now take a look at the used lift using the same costs we used above for the yearly expenses and the rental fees.
Year 1: $19,000 - $9,540 = $9,460 + $500 (yearly expenses) = $9,960
Year 2: $9,960 - $9,540 = $420 + $500 (yearly expenses) = $920
Year 3: $920 - $9,540 = -$8,620 + $500 (yearly expenses) = $8,120
Our payback period for the used lift looks to be just barley over 2 years.
Conclusion:
The payback period for both the new lift and the used lift look to be pretty quick. The new lift requires a pretty big upfront investment but it looks like you will see your money back within 4 years of your purchase and along with having the lift you will also have a trailer for your company. The used lift which requires a much lower initial investment gets you your money back in about 2 years. In my experience owning your lifts is a much better financial decision. It comes with the burden of being responsible for picking up and dropping off the equipment but in under 5 years both a new and used lift will be paid off and you will be able to profit off having them at the jobs. When you no longer have the expense of renting the equipment it also gives you the opportunity to be more flexible in your pricing if you are trying to be aggressive in getting jobs. In my opinion the business world is getting more and more logistic and transportation based with office buildings becoming vacant every day and warehouses being put up all over. These buildings will always need upgrades in power and lighting and lifts will be required for all of these jobs. Every companies financial situation is different, some cant afford to own their lifts some can, some don’t want the headache of dealing with the equipment and some are will to do it. If your on the fence about whether or not you should buy your own lift it is in my opinion that you should definitely get one.