Including full maintenance in your long-term lease contract can provide several meaningful benefits to your operation—given you take time to understand how to leverage your bargaining positions. We have seen first-hand how companies first thought they were getting a great deal, only to find out later it was nothing but a numbers game and they were on the losing team.
Typical benefits from a full-maintenance agreement include:
- Helps you budget. You know what your forklift fleet is going to cost each month.
- Puts the responsibility for maintenance squarely on the shoulders of your supplier.
- Takes you out of the maintenance business.
- Reduces overall maintenance costs.
But all these advantages can be wiped out if you are not equipped with the facts to make an informed decision.
A reputable dealer knows that the best way to keep you as a customer for life is to offer a fair rate and to work with you to lower it. Such a dealer will visit your facility to observe how you use your forklifts, including duty cycles, how your operators allocate the forklifts and several other factors that not only help to calculate the best rate, but also to share what you can do to reduce it. If a dealer does not schedule an application survey, chances are he is going to use an off-the-shelf rate that typically falls to his benefit. In other words, you’ll pay more than you should have to.
Also important is to make sure your maintenance contract is equal to the length of the lease. Some dealers will write one contract for the lease and a separate one for maintenance, usually written in such a way that the dealer has the opportunity to walk when he estimates the maintenance agreement will become unprofitable.
If you are presented with a markedly lower rate for full maintenance than other companies are proposing or than you have been proposed in the past, you need to look for an escape clause. Chances are you will find one, and the likelihood of it being used are pretty great.
The chart below illustrates how some dealers justify an initially low maintenance rate. Can you guess which month the dealer is going to elect as the opportunity to walk away from the agreement?
A dealer using a maintenance agreement with an exit clause most likely will choose to terminate or re-quote the agreement when he expects it to become unprofitable. In this instance, that point occurs at about the 24th month of the contract.
In the above example your dealer, after performing due diligence has quoted a reasonable rate of $250 per unit that they anticipate to last the life of the lease. However, a less-than-forthright dealer might propose a rate of $150 knowing that in the 24 month of the agreement they intend to walk away from their obligation, or force you into a re-quoting situation.
A reputable dealer, however, will use the initial application survey combined with a cost-per-hour supplied from the manufacturer to determine a rate that will apply for the entire term of your long-term lease, with no exit clause to escape the expenses once they surpass monthly income from the agreement.
That said, preserving the ability to review and renegotiate the rate if factors change can be beneficial for you. For example, the number of hours your forklifts are in use could increase or decrease dramatically. Any good business relationship would want to ensure both parties have the opportunity to make adjustments should operations change. But having an exit clause for the sake of having an exit clause is an invitation for some dealers to leave you with the bulk of the maintenance expenses on the backend of the lease.
Full maintenance is a valuable tool to help you manage your forklift fleet, and partnering with a dealership that has experience and a solid reputation for full maintenance is key to a mutually beneficial experience.
We would appreciate the opportunity to speak to you about full maintenance for your forklift fleet. Whether for new forklifts or an existing fleet, we will partner with you to develop a program tailored to your specific needs. Look for additional information on full maintenance and leasing later this month! And if you have any questions about full maintenance that you would like immediate feedback on, please contact us at 718-298-5270 NYC & Westchester 631-661-5050 Long Island .