Should You Buy or Lease A Commercial Truck
It can be very hard to decide whether to buy or lease a commercial truck.
Ask fleet owners who purchase commercial trucks, and they’ll provide you with a list of reasons as to why they do that. Turn to those who favor leasing, and it is likely that you’ll come out of the conversation thinking that maybe leasing is your best bet.
So what should you do: buy or lease?
While it is you who has to make the final call, what we can do, at best, is to take you through the pros and cons of each option. So that when the time comes, and you’re required to make a decision, you’ve enough knowledge at your disposal to select the best choice.
As most of you might tell, leasing is different from renting. While renting involves you paying for the asset, leasing requires you to pay for the vehicle’s use. Also, unlike renting – whose duration is a few days – leasing is for at least a year.
Following are the types of leasing:
Also known as finance lease, this type of leasing agreement allows you to increase the limit of the original lease (usually one year) on a month-to-month basis.
As its name implies, this leasing agreement comprises of a fixed term with well-defined monthly payments. In contrast to open lease – which allows you to exceed the predetermined mileage limit, closed-end lease offers no such flexibility.
Why You Should Lease a Commercial Truck
Following are some of the reasons:
All of us already know that when it comes to cost, paying monthly payment costs less than purchasing a vehicle outright. You can then use the preserved capital to invest in the core areas of your business.
Save on running costs:
Two of the biggest running costs which come with owning a truck are its fuel and maintenance costs. Leased vehicles cost less in both these areas. Why? Because leased vehicles are mostly new, they incur less wear and tear and post a better average.
Get new vehicles:
Whether you’re leasing it from a bank or a private vendor, most leased vehicles are new. So you get better safety features, lower maintenance costs, and the latest vehicle-related technologies.
Less paper work:
Much to the amusement of your accountant, a vehicle lease results in less paperwork. How? Since aren’t the one who is the vehicle’s owner and it isn’t your company whose name is on the title,tasks like license renewal payments, payments of property taxes and title retention are the headache of the leasing company.
In contrast to what you might be believing by now, not everything is doom and gloom about purchasing a vehicle. For, there are some benefits which you can only get when you purchase the commercial truck and put it on your company’s balance sheet as an asset. You will probably need to get commercial truck financing so make sure you have a plan to pay off any loans you take.
Why You Should Purchase a Commercial Truck
Following are some of the reasons:
In contrast to a leased vehicle – which places limitations regarding its wear and tear or mileage – it is you and your company which decide what distance your fleet will travel annually.
Change Vehicles Quickly:
As people who have experience leasing vehicles might tell, you cannot dispose of a leased vehicle before a certain time period, otherwise, you might be liable to a penalty. Fortunately, no such restrictions are there if you purchase a commercial truck.
Enjoy tax benefits:
When you’re using a leased vehicle, the depreciation value rests with the leasing company. However, in the case of a purchased vehicle, its depreciation benefit remains with you, which you can then use to offer profits.
Get vehicles on lower prices:
Provided your company buys a vehicle in a bulk from a certain dealer, you might negotiate lower vehicle prices. Even if you don’t, nearly every large fleet dealer charges enterprise-size fleet pricing to truckers, which is considerably lower than the market price of that fleet.
Lease or Buy: What Should You Do Then?
Having discussed the pros and cons of each option, let’s consider the situations in which either of the options will be best for you:
Consider Leasing if:
The turnout rate of your fleet is high and it is subjected to less-than-average wear and tear.
Consider Purchasing if:
The turnout rate of your fleet is low and it is subjected to lots of wear and tear.