News

Considering Leasing a truck over buying?

If you work in the transportation or logistics industry, as an owner-operator, contractor or business owner, there often comes a time in which you need to consider leasing a new truck over buying one.

These are a few things to consider to help you decide between the two options:

Need something reliable?

Leasing makes sense for many in the transportation business because it allows them to use a reliable vehicle at the lowest upfront cost possible. This can be great for someone who is new to the industry and who doesn’t want to deal with the hassles of maintenance or the pitfalls of purchasing a used vehicle.

It provides great flexibility as well, as once the lease term expires, the lessee can choose a similar vehicle or another one. Tax deductions can be claimed on the lease payments.

Lower upfront cost with leasing

There’s a dramatically lower upfront cost with leasing, many financing agreements to purchase a truck require up to 15 to 25% down, depending on the type of truck and the strength of the application.

Typically a brand new truck will be leased, with a minimal to no down payment. Monthly payments are usually lower than the cost of financing the same vehicle.

However, at the end of the lease, there is no ownership of the vehicle, if it is an operating lease structure.

Some lease structures may allow for the purchase of the vehicle at some point during the term of the lease or at the end, such as a capital lease, but these are typically long-term leases and come with several terms to consider.

Prefer to own your equipment?

In some transportation businesses, there is a desire or a practical need for equipment and fleet vehicle ownership.

Perhaps there are particular customizations that need to be made to the vehicles, which leasing typically would not allow. Some businesses want a sense of control over their assets which ownership provides.

In any case, purchasing a vehicle can make sense for some. However, it comes with drawbacks such as the need to cover maintenance after the warranty period expires, submitting a larger down payment for the vehicle, and not being able to upgrade or trade it in for a different vehicle after a few years.

It can be tricky to make the decision on whether to lease or buy a truck for your transportation business. AFG is able to meet with you to help you make the absolute best decision for your situation. Call us at 800-978-8817 with any questions.

3 Equipment Leasing Benefits

Leasing can save your business in many ways and ensure that you have new equipment to build it up. Relying on purchasing used or outdated equipment just isn’t an option for many businesses that need reliable equipment for their operations.

Consider these equipment leasing benefits which can make all the difference in the success of your company:

Tax Benefits       

Although it’s a good idea to meet with your accountant to discuss the specifics of how leasing can benefit your taxes, there are numerous tax advantages to leasing compared to buying.

You can often deduct the entire lease payments against your current revenue. However, if you had purchased your equipment, you would typically only be able to deduct the interest on the payment, not the principle.

With certain types of lease structures, such as a non-tax capital lease, you can also potentially take a Section 179 deduction which provides a deduction up to the full purchase price of the equipment (with certain dollar limits you should discuss with your accountant).

Not Needing to Rely on Outdated Equipment

Perhaps one of the biggest advantages is that you won’t have to rely on outdated equipment. By being able to use new equipment, you can ensure the efficiency of your operation and avoid costly downtime or mistakes.

Your risks are substantial when you purchase used equipment, and although you gain equity in your equipment if you purchase it and make payments toward it, you are also typically responsible for repairs and maintenance, especially if it is out of warranty.

Save Capital

By leasing equipment, you save on capital expenses substantially. For example, you will have to typically put a substantial percentage of the total cost down if you purchase your equipment outright. That can be a huge chunk of your savings if you are a newly established business or otherwise are dealing with cash flow issues.

Leasing offers a variety of benefits, including those mentioned above and many others, in terms of flexibility, minimal upfront costs, and the ability to obtain the necessary new equipment to grow your business.

Alliance Funding Group offers a variety of lease structures for many types of equipment for the industries we specialize in, among others, including IT, manufacturing, construction, transportation & logistics, agriculture, healthcare, and state and local government.

Contact Alliance Funding Group today at 1-800-978-8817 to learn more about the equipment leasing options available to you.

Pros and Cons of Equipment Leasing

Equipment leasing seems logical for many business owners, but like anything, it has some disadvantages. Considering both the Pros and Cons of Equipment Leasing will help you make the right decision when deciding between leasing over buying.

Below are some of them:

Pros of Leasing Equipment

• Lower initial expenses – perhaps one of the top benefits of leasing is the fact that you’ll have lower initial expenses. This means that you can acquire new equipment without having to spend large amounts on a down payment, thus maintaining your cash flow and avoiding the need to tie up large amounts of capital in an illiquid asset.
• Tax deductible – Because your lease payment can usually be deducted on your taxes, it can further save you on annual costs and justify the use of a lease structure. When financing your equipment purchase, your tax deductions are more limited .
• Warrantied equipment – You further lower your overhead costs by acquiring warrantied, new equipment. If anything goes wrong, you are typically not liable for repairs/maintenance costs, as long as the equipment you lease is still under warranty.
• Flexible payment terms – Leases can often have much more flexible payment terms, for example you can often extend the term of the lease so that you can lower your monthly payments. This can be advantageous, especially if you have less than perfect credit, if you have a newer business or you are trying to minimize your monthly costs.

Cons of Leasing Equipment

• Greater Long-Term Costs – You may have to spend more money in the long term when leasing compared to purchasing equipment upfront, depending on the structure of the lease.
• Obligation to Pay the Entire Lease – Most lease structures will require you to pay for the entire obligation of the lease. Some may allow for early termination fees if your business needs change or you find that you don’t need the equipment any longer.
• Lack of Ownership – This depends on your lease structure, but at the end of the lease you may have no rights of ownership of the equipment, such as with an operating lease. This may not matter if you would prefer to avoid the hassles of ownership such as costs associated with maintenance, selling the equipment when it’s no longer needed, etc.

Alliance Funding Group can help you determine the Pros and Cons of Equipment Leasing whether leasing and whether it is right for your business. Reach us today at 1-800-978-8817 for more information.