When you first start a company, you will have some serious budgetary restrictions. This means that you will be forced to make some pretty tough choices on things you need to buy versus things you can just lease. In most cases, transportation of your goods will be amongst the first things to outsource, seeing how buying a truck can be a formidable investment. On the other hand, once your business hits off and becomes profitable enough, you will again face a similar choice. This time, you will have to figure out what’s more profitable in the long run, buying a company vehicle or leasing it. With this in mind, here are a few things to consider.
How Much is the Truck Used?
The first question you need to ask is how much the truck is used every month. Most truck leasing companies estimate that you will use this truck for 10,000 to 12,000 miles per month. Everything more than that and the company you are leasing from will ask you to pay extra. This means that, if you’re planning on using your truck for 15,000 miles or more per month, it is far more affordable to simply make monthly credit payments for the truck. Of course, there’ always an option of going with a high-mileage lease, which is essentially different. Still, you should also keep in mind that, once you make the final payment, the truck will be yours, while with the leasing this is never the case.
The Price of the Truck
It would be foolish to even try making an assumption of which one is better, leasing or purchase, without considering the prices. First, you need to think about what kind of truck you want to buy. Are you buying a new truck or a used one? If it is the used one, how much was it used? What model is it? Did it undergo any work? Finally, you also need to think about where you are buying the truck from. For example, through affordable online auctions, you can find a unique offer that may make buying a truck worth your while, even though your initial planning may have suggested otherwise. It all depends on the price of the truck.
Operating Lease vs. Capital Lease
Leasing is a broad term and there is a major difference between an operating lease and a capital lease. While both of these two leasing provide you with a vehicle, this is where all the similarities end. An operating lease (also known as a true lease) is when you pay in order to use a vehicle for a period of time. The advantage of this type of leasing is that there’s no ownership involved and you don’t have to worry about whether you’ll need a better truck in few years’ time. On the other hand, you can go with a capital lease that may include the transfer of the ownership at its expiration, which usually comes with a discounted price. The best trait of this kind of lease is that it boosts your company’s book value, since it’s treated like debts in your accounting.
As you can see, there are many variables to think about when deciding whether to purchase a truck for your company’s needs or to simply lease it. Price and mileage are things you need to consider, but there are also a few minor issues to worry about. Having your own vehicle is always a more reliable option, since you don’t have to watch out for mileage restrictions and extra fees. Also, it’s an asset you can sell whenever you are in a dire need of money (something similar to a financial assurance).