Analysis
Why a fully depreciated forklift is the most expensive one you own
The case for owning needs two things: free capital and perfect discipline. Most companies have neither.
Start with the concession
There is a version of this calculation in which ownership wins, and it is the version most companies actually run. Count the cash out the door and a disciplined owner spends $4.87 an hour against $4.99 for a lease.
That comparison is wrong, and it is wrong in a way that always favors buying: it charges the buyer nothing for committing the full purchase price on day one. It is an interest-free loan to the ownership case, and no company's money is actually free.
Apply a capital charge — say 7%, which is conservative — and the ranking inverts.
What a forklift really costs per operating hour
| When the truck leaves the fleet | Hours | Cost per hour, cash | Cost per hour, capital charged |
|---|---|---|---|
| Lease and return | 10,000 | $4.99 | $4.93 |
| Own, replaced on time | 12,900 | $4.87 | $5.60 |
| Own, replaced late | 15,000 | $5.00 | $5.66 |
| Own, fully depreciated and still running | 20,000 | $6.26 | $6.48 |
| Own, run until it stops | 26,000 | $7.11 | $7.02 |
Figures are per operating hour, discounted at 7%.
On cash alone, ownership done right edges it. Charge for the capital and leasing is ahead of every ownership outcome — and the gap between ownership done right and ownership as practiced is another $0.76 an hour, on top.
The same figures, as a chart
Scroll sideways to see the full scale.
The bars are not equally likely. Weight them by how often each outcome actually happens and the owner lands at $6.36 an hour.
Assumptions
4,000 lb class electric counterbalance truck, about $43,000 delivered with battery and charger
If owned: 10-year book life; resale credited at disposal, from age and hours
2,000 operating hours a year — single shift
If leased: the lesser of 5 years or 10,000 hours, returned at term
Maintenance delivered through the manufacturer's distributor network
Both cost and hours discounted at 7%, mid-year convention
Notice which row moves least. The lease barely changes, because its payments were always spread. Ownership moves by seventy-three cents an hour, because its cost was always front-loaded and the comparison had been ignoring that.
Everything here is measured per operating hour, not in total dollars. These trucks ran for different lengths of time, and per hour is the only way to compare them fairly.
Why the disciplined owner is rare
Look at where the cost curve turns. On this equipment the economic replacement point, the hour at which repairing costs more than replacing, arrives at around 12,900 hours. At 2,000 hours a year, that is year six and a half.
Now look at what the books are doing at that moment. Most companies depreciate this class of equipment over five to ten years. On a five-year schedule the truck is fully written off roughly eighteen months before it should be replaced. On seven years, right about as it arrives. On ten, it is still carrying a little book value, which, oddly, is the only one of the three where the accounting is still saying anything at all.
That is the part worth sitting with: the shorter the book life, the sooner the asset goes silent. Once it is fully depreciated it shows no expense at all. The site sees a machine that costs nothing to keep, and a capital request to replace it. Nothing in that picture prompts a decision. So the truck stays, and the repairs get approved one invoice at a time, and each one is individually defensible.
The lower the utilization, the worse this gets. At 3,000 hours a year the replacement point arrives in year four, while the asset still shows depreciation expense and the decision is at least visible. At 1,000 hours a year it arrives in year thirteen, three years after even a ten-year schedule has written the truck off, and eight years after a five-year one. A replacement decision that far out, on an asset that appears to cost nothing, is not a decision anyone makes on time.
What the gap is worth
Weight those outcomes by how often each one actually happens and the expected owner lands at $6.36 per hour against a disciplined $5.60.
Seventy-six cents an hour. About $1,500 per truck per year. On a fleet of a thousand units, well over a million dollars a year, and that is on top of the capital gap, not instead of it.
That is not a financing cost. Nobody is charging it. It is the cost of a decision that no process requires anyone to make, on an asset that no report shows anyone the cost of.
And it is the one number a leasing structure does not improve. It removes it. Under a lease the truck goes back on a date agreed before it arrived. There is no decision to miss.
A note for the finance reader
The capital charge does one more thing worth knowing about.
On a cash basis there appears to be a crossover: below roughly 1,500 hours a year, buying looks cheaper, and that number gets cited whenever someone argues for owning the low-utilization trucks. Discount both streams at any plausible cost of capital and the crossover disappears: leasing is ahead at every level of utilization, down to a discount rate of about 3.5%, which is below most working capital facilities.
The crossover was never a finding about forklifts. It was an artifact of forgetting to charge for the money.
What to do about it
None of this requires you to take a position on leasing. It requires you to know three things about your own fleet: how old the owned units are, what each one costs per hour all in, and when each one passes the point of being worth running.
Most companies cannot produce any of the three. That difficulty is not an obstacle to the analysis — it is the first finding.
Where the numbers come from
Equipment cost, maintenance plan rates, the implied lease rate and the residual schedule come from a recent national competitive bid I ran: real awarded pricing, described here in general terms because the underlying bids are confidential.
Useful life in operating hours draws on a published seven-year study of 1,000 units by a fleet management provider, and on published dealer guidance for residual values by age and hours and for the point at which repair cost exceeds replacement cost.
The repair curve, the discount rate and the probability weights on the four ownership outcomes are mine. The conclusion holds across any plausible setting of those assumptions.