I think there will be a slow down in Europe , Some companies are already seeing this but will not say this openly , They keep saying that growth is good and show last year as a example of this but there will definitely be a slowdown in Europe this year. A gain Asia will lead the market. We could see the disappearance of some smaller European Manufactures mainly possibly in the Italian market. Also some of the Asian manufactures Like Clark , Nissan - TCM , Komatsu Hyundai and Doosan might look to concentrate on markets closer to there home.

andrew_j

thanks so much - you've explained it!

can u give me an example of the types of forklifts that are used in europe for the two functions - load and unload.. vs. the one type of forklift that would be used in the US to do both functions? i'm learning about the industry, so this might be a very basic question.

another question for the forum - do you think the European crisis will reduce demand for forklifts? do you think financing of forklifts to the customers and to the dealers will be adversely affected?

There are other factors at play as well. Americans think nothing of lifting boxes and consider it manly! In Europe due to culture and strict Health and Safety Laws everything is lifted by mechanized equipment.Europe's warehouses are far more "cubed" than the US, needing constant use of higher lift narrow aisle fork trucks in the aisles. This mean you have separate equipment to load/unload. Americans use the same truck for both functions, and therefore have to have 14' aisles, which is ok because rental rates are much cheaper than Europe. Imagine you were building a warehouse near Manhattan, and then think of the things you would do, to get the most out of that space.
Material handling in Europe is treated with respect as a saving rather than a cost. Here equipment purchase is often at the company President's whim.

A lot of the trucks that come of hire are sold on to emerging markets or back into europe. Companies like Linde and Jungheinrich have plants that only referb trucks and then sell them on. I don't know any ware they scrap truck just after five years. One point that has come out is that customers in the US use there truck over a longer period than in Europe. There have been one or two 10 year contracts lately but most are five years. The customer seems to get a better service on this with newer more productive trucks. We are looking into a new way of rental that will combine both benefits of the north american and european markets

bbforks

in response to your answer that forklifts in europe are trashed after 5 years... how come they aren't shipped and sold to emerging markets... similar to trucks, buses, agricultural equipment, etc. there's still value and i would imagine that there must be a market for 5 year old forklifts in the emerging markets, or even europe's less fortunate neighboring countries. any insight?

thanks.

It seems to me that the financing differences between the 2 continents make the difference. With Hire purchase, the company gets to depreciate the machine as they pay for it. With lease purchase, the payments are deducted in full with no depreciation. Depreciation starts after the lease ends, therefore, with HP. there's no tax advantage to keep the unit after your done paying for it. With a lease purchase. a company can still depreciate the unit down for a couple of years- delaying the purchase of a new machine.

In Italy the "Full rental" is entirely tax deductible, more-or less like your FMV lease, I think.
There must be some other explanation to justify twice the sales.

The so called dollar option lease is not really a lease in the eyes of the IRS. It is a time payment contract which at the end user retains ownership at the end of the contract term (provided they made all payments) & the equipment must be treated as a capital asset on the customers books. The FMV is a true lease & monthly payments can be treated as an operating expense - owner ship belongs to the leasing organization at the end of the term. With a FMV the end user is simply paying for usage of the equipment. They could possibly sell the equipment to the original lease customer at a "Fair Market Value" at the end of the term. The leasing company determines the market value at that the lease end.

I think it's more down to management choice the tax brakes for leasing will probably be similar because other areas use contract hire like auto's and construction industry. Like was pointed out if the service side is not up to it then customers won't go for it. This is why i think Large manufactures like KION will use there influence and move into to what will be a very large market. At the moment the European market will fall back ,Asia is very competitive Brazil is down in first Quarter. With new regulations and higher cost of fuel the only way to go will be rental because customers will want a more efficient equipment at a lower cost

Does anyone know the tax benefits of leasing/renting vs buying in Europe? I have to believe that there is a tax advantage to renting that we don't have, or maybe there's a penalty for purchasing we don't have.

We all have the same brand of machines at our disposal, no matter which side of the pond we happen to be on. We all live in a global economy and most companies now have international accounts. If there are advantages out there for companies to explore, I'm certain that they will. I guess time will tell whether renting/leasing becomes the norm over here.

If you were to look at KION figures 54% of turnover comes from tuck sales , 4% from hydraulic sales and 42% from services this 42 % is broken down into 24% after sales 10% rental 5% used truck sales 3% other. this would give the rental side of the business a 400 million euro turnover and a 200 million euro turnover on used trucks. Kion in this aim mainly would deal in Europe so the rental fleet will play a big part in Kion sales. if it accounted for half the new truck sales then the hole business of rental would account for just under 2 billion euro worth of sales. When you look at these figure's you can understand why kion companies push rental in there largest market Europe.


It won't be long before they start to do the Same in North America with linde talking part ownership of there dealers like in Europe. They will push the idea as many companies are now global and will see the benefit of off balance sheet finance and as finance gets harder to get in certain areas of Europe companies like Kion will look to expand in other markets with there rental packages.

"Others set a high pre-set number, get the business on price then hit the customer on damages at the end."

Well, i know about someone by my side that is specialized in this kind of rental.....
but the question is :"Don't you lose your customer after this negative reinforcement?" (Behaviorism's old theories.)

Let me start by saying that I'm self- employed, have never worked for a dealer and explination I wrote about was based on just a few experiences my customers have had while I was servicing their exsisting equipment. That may not represent how the industry as a whole operates on the lease-purchase program. I can tell you from experience that I've picked up customers that used to use dealers because of -multiple repairs for the same issue, misdiagnosing simple repairs with large expensive ones (unit won't start- dealer diagnoses bad engine- I'm called for a price comparison, find no igntion spark, have the unit running in 15 min)etc. Some of the techs in my area who work for dealers are paid a commision based on the price of the job- so it's in their best interest to find ways to jack up the cost.

As far as the dollar buy-out, again this is a tax issue. If you purchase something here with a loan, you have to seperate out the price of the unit & depreciate that, then declare the interest on another tax line. It all starts to get confusing. But- if you lease, you can write off the entire payment on one line- much simpler. But in the end you're actually buying the machine, just another way of "paying" for it.

I think that the issue of buying vs renting comes down to 2 issues- tax structure of your government & control of the repairs. In America, large corporations have their own service depts. They handle all the service on all the equipement (except warranty issues), purchase their own parts (usually from aftermarket sources, when possible)- in short- they have complete control over what & how gets repaired. In Europe, if a corp. is renting a machine & a breakdown happens, are the dealers usually authorized to just repair the issue, even if the repair isn't covered & it's a billable event? Since there would be no need for a in house service dept., what job position is responsible to make these types of dicisions?

bbforks - It is strange that we are in the same business and yet we are so different how we trade.

The dollar buy-out option would reflect a finance lease where the truck is written down to zero. We used to do that in the early days of finance. Today a value is pre-set on the machine so rather than writing down to zero, the finance writes down to a pre-determined number - say 20%. This brings the weekly rentals down and makes it more competitive. You can have huge variances on the pre-set figure. Some suppliers take a safe approach and keep it low at the expense of the weekly rate. Others set a high pre-set number, get the business on price then hit the customer on damages at the end.

As regards maintenance, it is the supplier's risk as to the maintenance money covers the total service and breakdowns but of course this must also fit into the pre-set values discussed above. if it is neglected, it wont be worth the value. I believe most service providers who do this, do enough to keep legal but would wait for breakdowns inbetween services. They certainly would not spend money unneccessarily.

bbforks - It is strange that we are in the same business and yet we are so different how we trade.

The dollar buy-out option would reflect a finance lease where the truck is written down to zero. We used to do that in the early days of finance. Today a value is pre-set on the machine so rather than writing down to zero, the finance writes down to a pre-determined number - say 20%. This brings the weekly rentals down and makes it more competitive. You can have huge variances on the pre-set figure. Some suppliers take a safe approach and keep it low at the expense of the weekly rate. Others set a high pre-set number, get the business on price then hit the customer on damages at the end.

As regards maintenance, it is the supplier's risk as to the maintenance money covers the total service and breakdowns but of course this must also fit into the pre-set values discussed above. if it is neglected, it wont be worth the value. I believe most service providers who do this, do enough to keep legal but would wait for breakdowns inbetween services. They certainly would not spend money unneccessarily.