The pros and cons of truck and equipment leasing
To lease, or not to lease? That is the question asked by many who are looking to start a small transport business. What are the benefits and drawbacks when leasing the vehicles and equipment you need, as opposed to buying outright?
We’ve broken down both options so you can make an informed decision about leasing the trucks and equipment needed when running your business.
- Cash flow remains undisturbed. Because there is a lower capital expense upfront, and monthly payments are predictable, and not tied up in a depreciating asset, you can manage your cash flow more easily.
- Lease payments can be claimed as a tax-deduction
- You can stay up-to-date with the latest advancements in vehicles and equipment. If you need to update to stay competitive or change to improve efficiencies, you have the flexibility to do so.
- If a piece of equipment or vehicle breaks or has issues due to normal wear and tear, the leasing company is usually in charge of fixing the equipment, saving you maintenance and repair costs.
- You can match lease terms to industry/contract, age limits, environmental specs, and safety upgrade time frames
- It’s likely that you will end up paying more over time than if you had bought the vehicle or equipment upfront
- You don’t own the vehicle or equipment so you have no option to sell when you’re done with it
- The length of the lease might be longer than you want so if the contract is strict you might be stuck paying for a piece of equipment or a vehicle that you no longer need
- Adding ancillary equipment to a leased vehicle (e.g. pumps/PTO) needs to be removed before the term end and is a cost that needs to be factored in
- Can you get regional support from the OEM or leasing service partners if you operate in regional areas? You don’t want to be caught out.
When it comes time for you to make a decision about leasing or buying a vehicle or equipment for your small transport business it will be important to weigh the primary leasing benefit of improved cash flow against the cost of not having total ownership of the asset.
If your capital is limited as a small business, then leasing equipment can be a good option. However, if you’re an established transport business or your vehicle or equipment has a long usable life, then purchasing is a valid option too.
This blog is a guide only and does not contain a definitive list of regulatory requirements which you must meet as a business owner. Businesses are required to comply with all laws, regulations, and codes of practice by identifying their risks, and develop and implement control measures tailored to their circumstances, and you must seek independent advice to assess your circumstances.
- Remember to weigh out the pros and cons of truck leasing with your specific situation in mind, will it work for your business?
- If you're a new small business with limited capital then leasing might be the way to go, but if you're an established transport business take the time to see if it's worth it
- You won't own the vehicle so any additional equipment you add onto it will have to be removed once the lease is up, this will come at an additional cost