A small equipment-rental company wants to add an electric scissor lift. The owner knows the local rental rates and has regular customers. A price from a Chinese supplier looks attractive; a quick calculation suggests that the machine could pay for itself in a year or two.
That calculation often misses two things. The advertised daily rate is not the revenue you collect every day, and a machine in your yard is not necessarily earning rent. To assess the purchase, establish the cash required to put it into service, estimate its incremental annual cash contribution, and decide how long you intend to own it.
1. Calculate the full amount needed to put the lift into service
The factory quotation is the starting point. In the following illustrative example, a rental company budgets for one standard electric scissor lift:
See the guide to warranty, parts and labor costs for the relevant checks.
| Initial investment | Assumed USD |
|---|---|
| Machine and agreed accessories from the Chinese supplier | 12,000 |
| International transport, import-related charges and delivery | 3,000 |
| Necessary local inspections, preparation and other pre-rental expenses | 1,000 |
| Total initial outlay | 16,000 |
These are invented figures for explaining the method, not current market prices or a Levantis customer case. The example assumes non-recoverable taxes are included and no delivery cost is omitted. Recoverable import taxes may still require cash at clearance, but should be separated from the final economic cost.
Start with the actual Incoterms® rule and named place. Check which charges the seller's offer already includes before adding freight, import and local delivery costs. See our scissor lift landed-cost guide for that calculation.
For this example, the initial cash investment is USD 16,000.
2. Calculate the cash the additional machine can generate in a year
Use your own completed rental contracts wherever possible. An effective daily rate reflects what customers actually pay under day, week or month contracts, discounts and free-day arrangements. Billable days are days for which revenue is charged—not every calendar day the machine is owned.
| Annual operating item | Calculation | USD |
|---|---|---|
| Effective revenue per billable day | Assumed | 85/day |
| Billable rental days | Assumed | 110 days |
| Rental revenue | 85 × 110 | 9,350 |
| Expenses linked to billable days | 10 × 110 | −1,100 |
| Annual fixed and planned expenses | Insurance, storage, routine maintenance, etc. | −1,800 |
| Annual operating cash contribution | 9,350 − 1,100 − 1,800 | 6,450 |
The USD 6,450 is a simplified operating cash contribution—not accounting profit. It excludes financing, income tax, unexpected major repairs, bad debts and anything not listed. Transport fees collected only to reimburse third parties should not be inflated into rental profit. Shared fleet overheads need a reasonable allocation where the additional machine actually uses those resources.
Above all, estimate additional demand. If another lift merely splits existing customers between two machines, copying the existing machine's billable days overstates the benefit of the purchase.
3. Calculate a simple cash payback period
Simple payback = initial investment ÷ annual operating cash contribution.
USD 16,000 ÷ USD 6,450 ≈ 2.48 years.
Under unchanged assumptions, the simple payback is about two and a half years. This is not a promise: rental rates, utilization and repairs change, and the cash rarely arrives evenly. It is a first screening measure, not a complete investment appraisal.
4. Test what happens when billable days change
Keep the equipment cost, daily rate and other assumptions the same. Change only the annual billable days:
| Annual scenario | 70 days | 110 days | 150 days |
|---|---|---|---|
| Rental revenue (USD) | 5,950 | 9,350 | 12,750 |
| Variable expenses (USD) | 700 | 1,100 | 1,500 |
| Fixed/planned expenses (USD) | 1,800 | 1,800 | 1,800 |
| Annual cash contribution (USD) | 3,450 | 6,450 | 9,450 |
| Simple payback | 4.64 years | 2.48 years | 1.69 years |
The machine has exactly the same purchase price in all three cases. Billable use changes the result substantially.
Look back at 12–24 months of similar rental orders. Which confirmed jobs could not be supplied because the fleet was short? Which orders overlapped? Did the existing machines spend long periods idle? Those observations are stronger than assuming a newly purchased unit will always match the fleet average.
5. Consider the exit value, without counting depreciation twice
Suppose the company holds the machine for five years, maintains annual cash contribution at USD 6,450 and sells it for USD 6,000 net at the end:
5 × 6,450 + 6,000 − 16,000 = USD 22,250.
This is a simplified cumulative cash surplus, not net present value, tax-adjusted profit or a market-supported resale estimate. The hypothetical USD 6,000 depends in practice on age, use, batteries, local demand and selling costs.
Do not deduct annual accounting depreciation again when computing this cash result: the acquisition outlay was already counted at the beginning. For a financed purchase, create a separate cash-flow view that includes the loan proceeds, interest, principal repayments and outstanding debt.
6. A practical tip: set an investment ceiling before asking for prices
Suppose the conservative scenario yields USD 3,450 a year and you want simple cash payback within four years, excluding residual value:
3,450 × 4 = USD 13,800.
That is a preliminary investment ceiling under those assumptions—not an automatic purchasing budget. Finance charges, taxes, major repairs and the required liquidity reserve could justify a lower number.
Now ask Chinese suppliers to quote a standard configuration and the essential options separately, with the battery, charger, documents, spare parts, warranty and delivery terms clearly stated. If the supplier proposes a higher-priced version, ask which concrete work requirements it meets that the basic version cannot. Avoid letting the supplier define your budget with the phrase “the best 12-metre lift”.
7. Decide with your business data, then obtain a usable China quotation
Check expected incremental billable days, rerun a conservative case, and compare your acceptable investment with a real, fully specified landed price. A lower Chinese purchase price can improve the investment; it cannot create rental demand that does not exist.
Want to calculate payback using an actual equipment price?
A spreadsheet is only as useful as its purchase-cost input. Levantis can work from a specific, available supplier quotation or request a current quote for the model you need. We can help verify the configuration, price, shipping scope and expected delivery costs, then place those inputs alongside your local rental rate and billable-day assumptions.
Send us the target lift type, destination and approximate rental rate. You do not need a full set of company accounts to start. We can clarify the China procurement side of the calculation; demand, operating costs and the final investment decision remain yours.