Should Your Business Lease Your Next Work Truck?

If your business is in need of a new business truck or other vehicle, you have two options available to you: you can purchase the truck outright and make payments on it monthly or you can lease your work truck, make payments, enjoy a HUGE tax benefit and have the option to return it at the end of a set period of time. Which option is right for you will depend upon your business’ needs. Read on to learn more about the benefits of leasing and the drawbacks that you need to be aware of:

Mechanic at workBenefits of Leasing a Work Truck

– Low Initial Cost. If you don’t have a lot of funds available to make a down payment on a vehicle, a lease may be the better option. The upfront costs of leasing are generally lower than the cost of purchasing.

– Lower Payments. Lease payments are typically lower than the cost of monthly installment loan payments if you’re financing your vehicle.

– Flexibility. If you tend to replace work vehicles frequently, a lease will spare you the hassles of having to sell and make it easy for you to upgrade to a newer model. Both short and long term leases are available to meet your needs.

– Balance Sheet Benefits. Leases do not affect your company balance sheet, so they allow you to still borrow for other purposes.

Easy Credit Approval : Equipment leasing is open to start up businesses and well established business. It also has very flexible credit guidelines making it possible for business owners with credit problems to be approved.

Drawbacks of Leasing a Work Truck

– Possibility of Large Final Payment. Depending on the type of lease that you have, your company could be saddled with a large final payment when you turn in the vehicle if the vehicle depreciates faster than the expected rate. If you plan on keeping the vehicle you should choose a lease with a $1 buyout at the end. Meaning at the end of the lease you pay $1 and you own it.

– Possibility of Mileage Limitations. Some leases will limit the number of miles that you can drive your commercial vehicle.

Types of Leases for Work Vehicles

If you do decide to lease your work truck, you’ll need to decide which type of lease is right for you. There are two main types of leases available:

– Closed End. With a closed end lease, you simply return your vehicle at the end of the leasing period. Unless excessive wear and tear or damage was caused to the work truck, you don’t owe any additional money. This type of lease places restrictions on the number of miles that you can drive the vehicle throughout the life of the lease. Most leases are limited to 12,000 miles of driving per year. If the mileage exceeds the allowable amount, extra fees are assessed.

– Open End. With an open end lease, you pay the difference between the total sum of your lease payments and the estimated market value of the vehicle at the end of the lease. With this type of lease, your business can drive an unlimited number of miles. Because this type of lease is more flexible in terms of mileage, it is the most common way to lease commercial vehicles.

Equipment Lease Buyouts

FMV or Fair Market Value : this type of equipment lease buyout has a smaller monthly payment but a big balloon payment at the end if you choose to keep the vehicle. Typically between 10% – 20% of the fair market value.

$1 Buyout – A $1 buyout tends to have a higher monthly payment but at the end of the lease period you pay $1 and you own the equipment.

 

For more information about how to lease your work truck or to learn more about the benefits of leasing, please contact (888) 778-5677.

Have a question or want an application sent to you? Please fill out this form and an equipment lease application will be sent to you and one of our equipment leasing representatives will contact you asap.

Elizabeth Roberts

Elizabeth Roberts

Liz Roberts and her team are continuously providing information to people who are ready to repair their credit and improve their credit score. Also NewHorizon.org team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 24+ years of business finance experience help you to get the financing you need! CONTACT US if need financing for your business.

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NHBS Inc © 2022

NewHorizon.org is an independent, advertising supported website. The owner of the site may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. NewHorizon.org has not reviewed all available credit card offers in the marketplace.

Privacy Policy Terms of Use

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