If you’re searching for a new commercial truck, you’re probably wondering whether you should buy it or lease it. After all, both options have benefits and drawbacks, so choosing between the two can be a challenge. What’s better for your particular business? What will leave you with more money in your pocket to spend on the family? To help you make your decision, these are some of the pros and cons of buying and leasing a new commercial vehicle.
Buying a truck
There are several benefits to buying a truck for your business. One is that you don’t have to worry about wear and tear or returning the vehicle at the end of a lease, and it also means that you can paint it, wrap it, decorate it or modify it however you want. This is especially important for drivers who spend time on dusty job sites, where a truck may become damaged or worn over time.
Another benefit of buying a commercial truck is that you can typically “depreciate” the vehicle in your taxes — or, put another way, take 20 percent of the value each year as a tax deduction. That’s a big deal to many small business owners, who are often looking for ways to save money through deductions.
The biggest drawback to buying instead of leasing is cost. You’ll likely have to pay more for the vehicle up front, usually in the form of a down payment. Your monthly payments will be higher, too. But there’s also a benefit here: at the end of your finance term, you will own your truck outright. That can’t be said with a lease, where you’ll have to give it back or decide to purchase it.
Leasing a truck
One of the major benefits of leasing a truck is cost. Frequently, manufacturers offer “zero down” lease deals, which allow you to drive a new vehicle off the lot without putting down anything at lease signing. That’s a sharp contrast to financing a truck, where you’re often required to put down a portion of the vehicle’s purchase price up front.
Another benefit of leasing a truck is tax related. For most commercial leases, small business owners can deduct lease payments from their taxes. Just like the tax benefits associated with buying a truck, this can give leasing a substantial appeal to small business owners looking to save money on their taxes.
There are, however, a few drawbacks to leasing. Namely, you’ll have to be careful with the truck since you can be charged for any “excess wear and tear” when the time comes to return it. And at the end of the lease, you’ll have to either buy the truck or get another one, since you don’t own it.
What should you choose?
The differences between buying and leasing are important, especially when you think about tax implications, wear and tear and cost. To figure out exactly which is right for you, carefully consider your business — and how much wear and tear your truck is likely to get — before making a decision.