6 Pros And Cons Of Buying Vs. Leasing A Commercial Truck
Many businesses benefit from the use of commercial trucks, but whether buying or leasing is better depends on your needs and wants. Consider these six pros and cons of buying your own commercial truck instead of leasing one to decide which one is the right option for your business.
Pro: It's an Asset for Your Company
When you purchase a commercial truck for your business, it becomes a tangible asset. You can use it to help get other loans or even turn it into cash for emergency funds. Even more importantly, however, owning a commercial truck allows you to access additional tax deductions because it is a depreciable asset. Like many tangible assets, your truck depreciates overtime and loses value. However, the IRS allows you to deduct some of this cost on your business taxes.
Con: You'll Probably Need a Loan
Unless you have enough cash to purchase the truck outright, you'll need to get a bank loan to buy it. This means you'll have to pay a monthly payment to the bank, which is usually higher than the monthly fee for leasing a vehicle. If your business is small or new, this monthly bill may strap your business and cause you to neglect other bills. It also adds to your debt, which may prevent you from getting other loans in the future to help your business.
Pro: The Money Is Put Toward the Value of the Truck
The nice thing about that high monthly bill is that, while some of the money is going toward interest, the rest is going toward the value of the truck. Once it is paid off, you get all the equity. On the flip side, if you choose to lease a commercial truck, your monthly payment isn't going toward the value of the vehicle. Much like renting a house, the money is going to the owner to pay for the benefit of using it. In the end, despite all the money you paid, the owner, not you, gets to keep all the equity and the truck.
Con: You're Responsible for Maintenance and Repairs
The truck belongs to you and so do all the maintenance and repair costs. Except in cases where insurance cover the costs, you get to pay for routine maintence care and any repairs from wear and tear. When you lease a vehicle, the owner is generally responsible for maintenance and repair costs, which takes the pressure off you and allows you to put that money toward other parts of the business.
Pro: You Spend Less Overall
When you buy a commercial truck, you pay a down payment, a higher monthly bill and for all the maintenance and repairs, so it may seem that purchasing a truck is the more expensive option. However, that may not be the case. If you end up wanting to buy your leased vehicle after the lease expires, expect to pay significantly more than had you simply taken out a loan and purchased it. This is because, as stated before, the monthly payment isn't going toward the cost of the truck. In this scenario, you pay years of monthly payments for leasing the vehicle, and then you pay for the current cost of the truck.
Con: You're Stuck With It
When you lease a commercial truck, you get the freedom to choose to switch to a new truck after the lease ends. So if your business suddenly expanded, and you need a larger truck, you have that freedom. However, when you purchase, you don't get that option. Since you put so much toward paying for and owning the truck, you're stuck with it for a long time, making it difficult for quickly growing or evolving businesses.
For smaller businesses that are just starting out, leasing seems to be a better option because it is less expensive and gives you the freedom to upgrade after a short time. However, larger or older businesses would be better purchasing. For more information about commercial trucks for sale, contact a dealer in your area today.