05 Dec Commercial Truck Leasing vs. Owning: Which One Is The Best?
Commercial truck leasing versus owning is not really a cut-and-dried decision which businesses can make, because the choice depends on several factors. There are financial considerations of course, but those aren’t the only factors that go into decision-making. You also need to consider your trucking routes, seasonality, organizational preferences, the type of operation you have, and even the configurations of your trucks.
Some fleet operators even choose to mix leasing and owning, because it makes the most sense for them to do so. In this discussion, we’ll consider the pros and cons of leasing versus owning, and once you’ve understood all the factors, it may help you to decide which would be better for your company.
Advantages of Owning Your Fleet of Trucks
At present, approximately two-thirds of all fleet operators in this country own their trucks outright, and the reason they have chosen to purchase rather than lease could be attributable to any one of several good reasons. It may have been a matter of company culture, i.e. the company has always owned its vehicles, and they prefer to follow the same route with ongoing purchases.
When you buy your vehicles, you have full ownership and full control over what happens to the vehicles throughout their entire service life. For some companies, it’s important to have this kind of control and they prefer to exercise it. For instance, the vehicles of your truck fleet may accumulate considerable wear and tear in a short time, and if you own those trucks that won’t be a problem.
However, if you’re leasing them, the company you’re leasing from may require you to maintain the vehicles in decent shape so they can be re-sold or re-leased at the end of your leasing period. You will also own the truck for a far longer period than you would be leasing it, in most cases. You’ll probably have to arrange for a new commercial truck leasing agreement every two or three years with a leasing company.
By contrast, when you own the vehicles yourself you can operate them literally until they can’t be used anymore. The financial appeal of owning your trucks is that once they’ve been completely paid for, you won’t have any ongoing monthly payments that you’d be responsible for, so capital could be used for other purposes.
Disadvantages of Owning a Truck Fleet
There are some drawbacks to owning your vehicles, chief of which is that you would be responsible for all repairs and regular maintenance for the trucks. That means you would have to install a maintenance shop in your company where they can be regularly serviced and repaired as needed. You would also have to maintain a staff of competent repair personnel, which will amount to additional financial overhead.
This can be a major financial consideration when you think about how frequently it will be necessary to change tires and brakes and to do everything else to keep your fleet of trucks in good running order. In the later stages of ownership, when your vehicles have accumulated significant wear and tear, it will be especially difficult to keep them operating.
It will cost you more to keep them on the road and operating efficiently. It may also be difficult to attract good drivers when your fleet of trucks is aging and becoming less reliable. You are also subject to heavy taxation when purchasing a vehicle, and that can add considerably to the total sticker price of your truck.
Advantages of Leasing Your Commercial Vehicles
When you choose commercial truck leasing for your trucks, you’ll be able to acquire them without all the hassle of going through credit applications and all the other upfront costs of purchasing. The major financial advantage of leasing is that you can spread out the cost of the vehicle in monthly payments, rather than having to come up with a big down payment or a huge amount of money to purchase it.
This will give you financial flexibility so that you can use your assets to keep the company running smoothly. When you lease your trucks, they won’t depreciate over time, and you won’t have to carry them as a liability on your financial books. It will also serve to keep your fleet up-to-date, because you can obtain a brand-new vehicle at the end of the loose lease period, rather than owning it for its full-service life.
Commercial truck leasing also relieves you of the responsibility for ongoing maintenance and repairs, which means you don’t necessarily need to have a staff of qualified maintenance individuals working for your company.
Disadvantages of Leasing Commercial Trucks
Leasing is very similar to renting in the way that it works, and since you would not actually own the truck, you would not be allowed to do whatever you want with it. That means you can’t make any changes to it or modify it in any way because you don’t own it. When you lease a vehicle, you have to keep it in good condition, so that it can be returned to the leasing company in good shape, and possibly be re-leased or sold to another customer.
Some commercial truck leasing agreements call for restrictions on annual mileage, and you would be obliged to observe these restrictions when leasing. For some companies involved with long-distance transportation, this could be a deal-breaker or at least a severe hindrance. If you do exceed annual mileage restrictions, you may be subject to penalties that are written into the terms of the lease.
Finally, when you sign a lease, it is considered a binding contract, and you will then be obliged to fulfill the terms of that lease, regardless of your financial circumstances. If your company should suffer a major downturn, you would still have to make your monthly payments, to live up to the terms of your contract.
When it comes down to it, it’s not a question of one of these options being inherently better than the other. It really boils down to which is a better fit for your company’s financial circumstances and overall operations. What is highly advantageous for one company may prove to be a real burden for another, so it just becomes a matter of what’s best for you at the moment.
If you work with a company like Corporate Fleet Services, Inc., you can choose which option you’d prefer, and acquire your truck in the manner which is most beneficial for your company. Contact us today, so we can discuss some options with you, and help you to get the equipment you need.