11 Nov Should You Lease or Buy A Truck For Your Business?
The common problem most business owners deal with is whether to buy, or lease the truck for business purposes. This problem can be solved only if you consider the following factors: the mileage, the expenses, the types of a lease and the purchase options.
A lease may be the best option if you put 12,000 to 15,000 miles on your truck. However, if you plan to put more than 15,000 miles on your vehicle, you should consider buying. The reason behind this is that the lease stipulates the limited number of miles. If you have driven over the limit, you must pay a fee after the expiration date of the lease. You can also buy extra miles at the beginning of the lease at a cheaper price.
The Expenses for a Leased and an Owned Truck
The expenses of an owned truck include: the total price of the truck/the interest portion of the loan payment depreciation, petrol, repairs and maintenance, washes, the license and insurance.
The total amount of money you may need to pay for a leased truck includes: the lease payments at the beginning of the lease (the first monthly payment, the security deposit, or the final monthly payment, the down payment, the license, freight and destination charges, taxes and the processing fee), the lease payments at the end of the lease (excess mileage, damage, early termination), petrol, repairs and maintenance, washes and insurance.
The Types of Lease and Purchase Options
The first purchase option is to buy a truck outright. As the small percentage of business owners can do that, financing a vehicle is usually considered. Buying a used commercial truck is another way to upgrade your business equipment. Finally, finding good truck sales in auction houses is also possible. Saving your money and time is guaranteed in this case. Bear in mind that auction houses offer online bidding, as well.
There are two common types of a lease: an operational lease and a capital lease. If you opt for the operational lease, you, as a business owner, have the right to use a truck for a limited period of time. When the lease term expires, you are required to return the truck. On the other hand, business owners have the possibility to purchase the truck at the expiration of the lease term if they consider the capital lease. The capital lease is more complicated as a lessee can depreciate the value of the truck over the life of the lease.
Ask yourself these questions
If you are still uncertain whether to buy, or lease, ask yourself the following questions.
- Do you need a truck you cannot afford to buy, but can afford to lease?
- Do you want to customize the truck?
- Do you use the truck in a way that causes wear and tear?
- Do you want to replace the truck every couple of years?
- How frequently do you plan to service the truck?
Now, answer the question using the information above.
Finally, once you have found the truck you want to buy/lease, gather all the numbers and expenses from this article. Depending on your budget, you should be able to make a final decision. Contacting a trusted tax professional, who can advise on accounting matters is also recommended. Make sure you know all the expenses before you visit an accountant.