Leasing a commercial vehicle is a big commitment. If you’re operating a fleet, starting a new business, or looking to get into the trucking industry, make sure you do your research before signing on the dotted line. There are many types of vehicles available from tractor trailers to specialized vans and trucks. Each have their own benefits and drawbacks. It’s important to know what you need before making a decision. Trucking is a business – so you must understand the relationship between your lease and your income. Before you start leasing a commercial vehicle, ask yourself these three questions.
#1. What Are the Restrictions on Your Lease?
For fleet managers looking for a cost-effective way to add a vehicle or two to their fleet, leasing a commercial vehicle can seem like a no-brainer. The lower upfront cost helps smaller businesses or solo operations get the equipment they need to operate without spending all of their capital on day one.
But it’s important to run the numbers and make sure that a lease agreement makes sense for the business you’re operating. Certain small businesses, such as landscapers or snow plowing, often don’t need to worry about restrictions such as mileage limits, but you might! If your business has you traveling across large areas, it can cause your lease to be much more expensive than you planned.
Likewise, wear-and-tear is unavoidable as you work. When leasing a commercial vehicle, the dealer expects you to return the truck or van back in a condition that makes it easy to lease again. While you may think a tiny dent or spilled coffee is nothing to worry about, your dealer will disagree. Like mileage overages, these small surprises can add up and make your lease more expensive than buying outright.
Before you sign any lease, make sure you understand the things for which you’re responsible. At the end of the lease, you want to know that you profited from the contract. Short-term savings can turn into long-term lost profit.
#2. How Long Will You Need It?
If you run a seasonal business, you need to plan your lease based around your best months of operation. A 6-month lease may seem like a good deal, but for a snow plow business that only operates maximally for a few months out of the year, it’s likely a net loss. Find a lessor that can help you plan a lease that will give you flexibility during your busy season.
Sometimes, businesses can get a sudden influx of new jobs all at once. It may be tempting to invest in a lease to help combat the increase in work – but for small businesses, this can be a huge pitfall. The typical ups-and-downs can trick you into overestimating your future income, and a longer-term lease may end up costing you.
In those situations, consider a short-term rental over a lease. While the per-month costs may seem higher, you can save a fortune by not having a surplus of vehicles if your business slows down again. Short-term rentals aren’t just helpful for busy schedules, either! When your primary vehicles are in the shop, or if you need a vehicle upfitted with modern equipment, they can help fill the gaps in your fleet without too much risk.
#3. Would It Make More Sense to Buy?
The most critical question you can ask yourself before signing a lease for a commercial vehicle is whether or not it’s better to buy. There are pros and cons to leasing and purchasing, and you’re the only one that can decide which is the better option.
The benefits of leasing are very straight-forward:
Low Upfront Cost – Other than a deposit, a lease is only as expensive as the monthly costs. This can make it the only option for smaller businesses trying to get started or grow.
No Commitment – When you lease a vehicle, you know exactly how long you’ll be using it without having to worry about resale or long-term maintenance.
Leasing Company Benefits – When you work with a reputable lessor, they can offer you unique benefits in terms of structuring a lease and a vehicle specifically for your needs. This varies from company to company, so make sure that you work with a reputable commercial vehicle dealer to get the most out of your lease.
However, it’s worth considering these drawbacks:
Lost Equity – Money spent on a lease is money that you could have spent on a payment. While leases can be cheaper in the short-term, if you frequently lease commercial vehicles, you’ll lose long-term profits.
No Ownership – Ownership of a vehicle is more than just permanent access. When you own a vehicle, it lets you make upgrades and repair decisions that otherwise would be exclusively the rights of the leasing company.
Tax Benefits – When you own a vehicle, you’re eligible for tax benefits such as those associated with depreciation. While state laws differ, in many cases, you lose more tax benefits than you gain from leasing a vehicle instead of owning it.
Ultimately, the question of whether to lease or buy comes down to which one will make the most sense for your business’s goals. Do the math and find out the breakpoint where ownership would save you more. If your company is likely to hit that breakpoint, consider if you can find a better option through purchasing instead of leasing a commercial vehicle.
Do You Have Leasing Questions? Contact Semi Service Today!
If you’re wondering if leasing a commercial vehicle is right for your business, we can help answer your questions! From leases to rentals to buying, we can help you find the right truck or trailer.
Contact us online or give us a call at (801) 895-4419 to get started today!
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