£75 a week.

Well, that’s the simple, and probably misleading, answer to what is a complicated question.

 

Firstly, forklifts come in all shapes, sizes and power types. You wouldn’t expect to pay the same for a 1.5t electric 3 wheeler as a 15 tonnes diesel, so we need to refine the question. It’s not simply the higher the truck capacity, the more it costs, although that is broadly true. Heavier loads require greater weight to counterbalance the load, which requires larger chassis, stronger masts, engines with more grunt and so on. As a rule of thumb, IC engine trucks (so, LPG and diesel) tend to be around the same outright purchase price, so say, a 2.5t diesel is approximately the same as a 2.5t LPG.

The UK forklift market in 2015 was actually skewed towards electrics, of which around 6,000 were sold, compared to 4,500 LPG trucks and 5,500 diesels. This is despite the fact that an electric truck of like for like size, shape and capacity, is approximately £5,500 more expensive to purchase outright (based on a 2.5t capacity) – roughly equivalent to the cost of the battery and charger.

So why more popular? Well the cost, cleanliness, and simplicity of electric power compared to diesel as well as noise, indoor and outdoor use, food or beverage applications and crucially emissions, are all generally in the electric truck’s favour.

Secondly, there are levels of forklift brands which you might call, premium, mid-market and value. Here we have to wade into the muddy waters of brand perception, different products within brand ranges and one man’s meat being another man’s poison.

The defining lines are obviously blurred between the brand levels, as lower end players improve their features, and premium brands subsidise the purchase price, perhaps to cash in on damage or parts spend later on.

Premium Versus Mid-Market Versus Low-Cost

In outright purchase terms alone, you might expect a premium brand to cost approximately 5% more, and a value brand 10% less, than a mid-market model. By premium, we’re including Linde, Toyota, Komatsu, Yale, Still, Cesab, Atlet and a few others. These claim increased productivity levels, and therefore less overall costs, as a result of their perceived quality and capabilities. At the value end, we’re pointing the finger at Goodsense, Samuk, Nexen, Puma, Artison, Heli and more. These are usually simpler in design and cheaper to repair, but are less finessed and can suffer from parts supply and technical support.

featured_article_2_tcmOther brands, including TCM, Mitsubishi, Hyundai, Cat and others are squarely in the middle. These guys try to balance the demands of the discerning fleet user with the savvy owner/manager. (That’s not a comment on build quality or company ethics, by the way. We’re purely looking at the positioning of the trucks features, and where the companies themselves want to be). Those mid-range brands, in our 2.5 tonnes example, are currently around £18-19K.

The price is still subject to a variety of specification options, our example assumes it is IC engine powered, with a triple mast, sideshift and beacon, and is based on our knowledge of the market and access to retail price lists. Unfortunately, these lists aren’t definitive, because manufacturers offer discounts to dealers and customers based on the strength of their desire to win or retain the business.

No one wants to pay over the odds for service, but the customer’s assessment of the cost may be overridden by a number of factors.

A third way in which prices are influenced is finance; or more accurately, methods of acquisition. Outright purchase costs seem straightforward enough, but it’s a fairly rare choice, at least in the UK. This is for good reasons – purchasing an asset means it goes on the company books, so tax and depreciation implications are applied accordingly. Hired equipment remains the property of the provider or, in most circumstances, the finance company. This itself has implications for servicing and warranty provision, which we will come on to.

Hire contracts can be structured in many ways, over different time frames, with variable rates and clauses to influence the weekly rate. The standard £75 a week rate is really something that the industry has gravitated towards as a market accepted rate, but is more difficult to achieve year-in, year-out, and often hides a bigger picture.

To get to a weekly figure that the customer finds acceptable, much like the car industry, the savvy salesman can tweak the finance rate (and finance house), the contract term, the residual value (RV) of the truck at the end of the contract, the inclusion or exclusion of parts and labour, and the maintenance rate.

This brings in our next variable: service. All trucks require service. It is a legal requirement to keep equipment safe and fit for purpose and in the case of new equipment, a condition of the warranty that it is serviced at regular intervals (as specified by the manufacturer).

A premium product may be sold on the idea that it requires maintaining less frequently (whether this is true may itself be fiercely debated), but breakdown it most certainly will if not regularly maintained to a sufficient standard. You might think it fairly simple to compare hourly rates or service response rates, but damage, service intervals, other add-ins like tyres, parts and warranties, can all influence the applied rate.

Parts & Service

Whatever the inclusions, the real world price is market-driven: £45 per hour may get you a service in some parts of the country. Other areas might be less well served by competition, leaving hourly rates nudging £100. Attempts to chip away at these rates are usually defended by determined service managers, and are generally grounded in real world costs for parts, product reliability and engineer salaries.

No one wants to pay over the odds for service, but here the customer’s assessment of the cost may be overridden by factors such as the quality of support; the geographical location of the supporting business; whether they are permanently based on-site or mobile; whether they’ve done a good job in the past; the ease and accuracy of processing payments; the cost of what is and isn’t considered outside the scope of the maintenance agreement (such as operator damage and tyres). Major fleet users have been known, on more than one occasion, to change supplier on these factors alone.

featured_article_partsAs a rule of thumb, a premium brand will likely as not dictate a premium service charge. Parts and damage costs may also be higher. The benefit of fewer breakdowns may offset these, but again that is a fairly subjective assessment, as it compares the actual (the cost of the service provision) with the supposed (what it would have been if the circumstances were the same but the brand different). Some may also charge for LOLERS / Thorough Examinations, whilst others include this in their regular maintenance work. Either way, you should certainly not be paying more than £100 per truck for this.

Then there’s new or used. Online you can find 2.5t capacity trucks around the £6K – £7K mark, even lower, if you’re feeling brave! The trouble with fishing in these murky waters is not knowing what’s gone on beforehand. At Carrylift, we make a point of only refurbishing trucks we know have a trustworthy service history, where we’re the ones that have serviced them. We also select low hours application trucks for our used equipment sales and complete the most extensive refurbishment process in the industry.

Looking to fill a gap without buying or renting a new forklift is fair enough, and there are excellent quality machines out there that can run on well beyond the standard five or six years. The trouble is, seven or eight years after the market nosedived due to the recession, the quantity of used trucks is low, pushing prices up and up. You’ll also find it almost impossible to get finance on a truck older than 12 years old if you’re financing it for three years or more. The major lenders walk away from financing anything that’s over 15 years old at the end of the allotted term.

The Total Cost of Ownership

Of course, fuel and emissions may be included in what is often called the Total Cost of Ownership, but even here manufacturers are being a little disingenuous as operator salaries and the cost of administration (the cost of invoice processing and the ‘buggeration’ factor) are equally significant.

bowker_carrylift_aisle-masterThat said, fuel can make a huge difference. You may have your own view on whether manufacturer figures can be trusted, and just to make matters even more complicated, some use the Japanese-led J-Cycle and others the VDI Cycle (from Verband Deutscher Ingenieure, meaning “Association of German Engineers”) to carry out fuel consumption tests.

Carrying out your own real world tests is, of course, more appropriate if you can arrange it. In 2015, one Carrylift customer, the transport company, Bowker Group, found a significant difference when testing diesel trucks performing the same operation on the same site (Find out more in our feature here…).

The Nissans used around three quarters (actually 77%) of the fuel the others used, enough to sway the purchase decision to Nissan (now TCM) and save anywhere between £9 to £16 (depending on the fluctuating diesel costs) in fuel  per shift on a four truck application.

Emissions may prove increasingly important in the near future, and regulations have already forced manufacturers to work harder to improve engine performance – usually via more complicated and more costly engine management software.

Many in the industry believe that customers want a relatively low cost machine that is not too expensive to fix, simple to maintain and can be back in service in a short space of time if a fault arises. Unfortunately, this is looking increasingly difficult to achieve. Meanwhile, corporate customers want to be seen to be reducing their emissions wherever possible. Something as simple as a 3-Way Catalytic Converter can add over £1,000 to the list price of a Doosan, whilst others include it as standard.

Usage & The Residual Value

Our final variable is usage. This is really linked to the RV (Residual Value), mentioned earlier, and is akin to all those attractive car leasing offers you see, only to discover they’re based on 6,000 miles a year.

A low use / low hours truck in a clean and not too abrasive environment will usually permit a truck to be valued higher at the end of a contract term than one in, say, a tannery or furnace application where corrosive elements will damage the truck’s integrity.

Looking after your equipment means it will have a higher resale value. The salesman can factor in a higher RV (boss permitting!) and in effect, subsidise your rate. It doesn’t fundamentally change the cost of the equipment to buy, but it does mean that for those renting it, as so many are, you are not paying as much for the privilege.

Pretty much all forklift truck providers bang on about the support they offer, but with all these factors in play, it really is important to take as much notice about the way a truck will be maintained and run, as it is the type and quality in the first place.

In the end, the machine is only as good as the back-up, and the temptation to save as much money as possible on day one, may seem like a false economy if things go wrong on days two, three and four…