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Source: paclease.com
If you operate a commercial truck fleet, you may have asked yourself: Is it better to lease or own my trucks? Whether you’re an established carrier or just starting out, the decision to lease or purchase your vehicles impacts everything from your business’s cash flow to how you manage your fleet.
For some fleets, owning their vehicles may make the most sense, while leasing, or a combination of owning and leasing, is the best option for others. We’ve laid out things to consider when making acquisition plans for your fleet so you can make a decision that best fits the needs of your business.
What to Consider When Deciding Between Leasing and Buying
There are pros and cons to both leasing and buying commercial trucks, and there are many factors to consider when making plans to add new vehicles to your fleet. Before heading to your local truck dealership or leasing location, it’s important to be able to answer the following questions. Your answers can help you and your truck sales/leasing representative make the best choice for your fleet’s bottom line.
- What is your business’s core competency?
- What is the total cost per mile of your fleet?
- What is the internal cost of capital for your business?
- How much time do you spend per month dealing with administrative and management needs for your fleet?
- How do your costs compare to other fleets of similar size and type?
- What does a typical route look like for your drivers?
- Do your fleet vehicles require specific configurations?
- Does your industry experience seasonality?
Benefits of Leasing a Commercial Truck
Leasing has many attractive benefits for companies needing an alternative to purchasing new vehicles, including predictable monthly payments, flexibility and reduced risks. Below are just a few of the benefits that commercial truck leases can provide.
Stability: Predicting truck operating costs, such as maintenance and replacement parts, as well as forecasting customer demand, can be a challenge. A full-service lease comes with the benefit of a set monthly budget predefined in your lease agreement. This means you won’t have to worry about surprise expenditures when unexpected repairs inevitably pop up. Plus, most lease agreements provide the flexibility to scale your fleet size as demand changes.
Cash Flow: Leasing frees up precious capital that you can invest into your business instead of paying off a depreciating vehicle asset.
Lower Upfront Costs: Leasing gives fleet operators an option to obtain equipment without a high upfront down payment and the credit score requirements that come with ownership and financing a purchase. Lessees are also not subject to the taxes and licensing fees applied to vehicle purchases.
Reduced Risk: Leased trucks are simply turned in at the end of the lease and new units are picked up if needed. This eliminates the risk of being upside-down with declining assets if business conditions change and you’re forced to sell off owned vehicles.
Ability to Upgrade to Equipment More Frequently: Purchasing new vehicles every five to seven years may be unaffordable for some fleets. With full-service leasing, fleets can swap out trucks in their fleet for newer models every three to five years without the upfront costs. Adding newer vehicles to your fleet helps with recruiting and retaining drivers. And newer models are also more fuel efficient and offer the latest technologies that can help reduce fuel costs and increase safety.
When It Makes Sense to Buy a Truck
Of course, leasing doesn’t make sense for every fleet operator. Companies whose business primarily revolves around trucking and those who have sufficient capital are the perfect candidates for full truck ownership or even a mixed fleet of owned and leased trucks. Below are some scenarios where it may make sense for you to purchase a truck rather than lease:
- You have the cash to invest in a new vehicle.
- You plan to operate the truck for longer than five to seven years.
- You have experienced technicians who can manage ongoing preventive maintenance and repairs in-house, or the budgeting ability to outsource maintenance for your fleet on an ongoing basis.
- You have the stability needed to manage volatile market conditions.
Additional Benefits of Truck Ownership
Adding Business Assets: Buying a truck allows you to add the vehicle as a physical asset on your balance sheet. It can then act as collateral and help improve the value of your company. Plus, commercial vehicles you purchase for your business may qualify for the Section 179 tax deduction, which allows you to immediately deduct the full purchase price of the vehicle from your business’s taxable income.
Building Equity: If you finance your purchase, you’re earning equity each time you make a payment on your truck. And once you’ve paid off the truck and own it outright, you can continue to operate the truck or use the equity to trade it in for something newer.
Customization Options: When you have full ownership of a truck, you can customize or modify the truck without any restrictions. There are typically restrictions in place for leased vehicles when it comes to upgrading components for enhanced performance or outfitting the interior for enhanced comfort.
Explore Leasing and Rental Options from Rush Truck Leasing
Rush Truck Leasing is your premier, full-service commercial leasing and rental solutions provider, representing the nation’s leading truck leasing companies — PacLease and Idealease. Rush Truck Leasing can help guide you in making the right choice for your business, taking into consideration factors such as your operation type, financial implications, routes, seasonality of your equipment needs and your company’s preferences.
Take advantage of Rush Truck Leasing’s full-service truck leasing, short-term rental programs, maintenance plans, electronic fleet management, emergency roadside service and more. With a fleet of nearly 7,000 heavy- and medium-duty trucks from Peterbilt and International configured in a wide range of specifications and applications, Rush Truck Leasing can customize a lease or rental program to fit your exact business needs.
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