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.