Buying a truck can be a major expense for companies of all sizes. When it’s time to get a new truck, you’ll find that you’re faced with the decision to either purchase it or lease it. Don’t know which path to take? Let’s take a look at the advantages (as well as disadvantages) of both options:
Leasing is more or less financing the use of the truck, where a loan finances the truck itself.
One of the biggest differences between a lease and a purchase is what happens after all final payments have been made. When you lease a truck, you don’t become the owner at the end of the leasing terms. Some leases give you the option to purchase the truck when the lease is up for an additional cost, while others let you to trade it in for another truck or for any remaining cash value there might be.
Depending on the lease you end up with, you could end up paying more. You might be paying for mileage or any wear and tear on the truck. Leases general include other expenses, like security deposits, acquisition fees and other various fees.
Leasing might give you flexible options, but flexibility and convenience can cost you in the long run if you aren’t careful. Even if you read all of your lease terms closely and make a good decision that works for you, an outstanding lease on a vehicle can impact your company’s cash flow.
Buying a truck either involves making the purchase in full or taking out a loan for the purchase amount, minus any down payment you can put down. Unlike leasing, purchasing a truck won’t involve as many extra fees or expenses. Purchasing also allows your business to establish itself and grow equity over time. If you can’t purchase in full, or choose not to for any other reason, there are plenty of financing options available to choose from.
When you make the last payment on the loan, your company gains full ownership of the vehicle. You’re now free to keep and use the truck or sell it for more capital to obtain newer, better trucks.
The decision to lease or purchase a new truck will always depend on your company’s unique and ever-changing situation, as well as current cash flow. If you want to increase your fleet, freight factoring can help increase cash flow and working capital, making your lease or loan payments easier to manage. Contact us today!