No matter whether you are looking to add to your large fleet of business vehicles or you are seeking to obtain your very first truck, there are many different factors you need to consider. One of the most important factors is whether you are going to lease the truck or purchase it outright. To help you make up your mind, read on to discover everything you need to know, from tax implications to the financial side of things.
The difference between buying and leasing
Buying and leasing are the two options you generally have available to you when looking for a truck for your business. Buying your truck means paying for it outright or getting a loan. The main difference here is that the truck will belong to you. On the other hand, you could lease the truck, which means you pay a monthly fee to use the van. In this case, you won’t own the vehicle. Nonetheless, with some cases you do have the option to by the truck at the end of the lease by paying a lump sum.
Why lease a truck?
Firstly, we will take a look at the benefits associated with leasing a van. When you lease a van, you aren’t left solely responsible for the legal logistics and the upkeep of the vehicle. This falls onto the shoulders of the company you have leased the vehicle from. This can be especially beneficial for start-ups, as the cost of repairs and breakdowns could cripple your firm. With a lease, you will know exactly what you need to pay for the truck on a monthly business. This enables you to manage your money more effectively, as you won’t have any nasty surprises along the way. Of course, a more established business may be able to weather any repair bills that come along, so it is all about determining what is right for you.
Trying before you buy is an option when leasing. If you are unsure regarding what truck is going to be right for your business, you don’t have to worry about having your money tied into a truck when purchasing it. A lease offers greater flexibility in this sense. You can upgrade your truck every few years. Plus, you will have access to trucks you probably would not be able to purchase outright. This is because monthly payments are more manageable for high quality trucks as opposed to buying them outright. This will benefit your business if the trucks bring about improved efficiency and performance. However, there is no point in leasing an expensive model simply for the sake of it.
Why buy a truck?
Of course, the main reason why most business owners prefer buying to leasing is because they will own the equipment outright. You may assume that this is too expensive for you, but make sure you consider all options before making your decision. There are companies like Truck Dealers Australia who offer trucks at competitive rates through auctions, which is something a lot of people don’t think about. You can view our truck inventory for more information. If you are going to take out a loan to finance a truck, you should also look at all of your financing options before making your decision. There are many different types of loans available today, with various rates of interest and other flexible terms and conditions. You need to know what is fully accessible to you before you determine whether you can afford to buy outright or not.
You also need to consider the fact that buying a van will be cheaper on the whole. Despite the fact that it may require greater start up costs, the overall payment associated with leasing will be larger than the cost of buying outright. Plus, if you need a cash injection, you will always have the option of selling your van. Not only this, but if you already have a truck or any other type of business vehicle, you can always trade this in and save money on the purchase.
A lot of people would also argue that buying a truck provides them with a greater level of flexibility. This is because they don’t have to worry about any fines or fees they may be subject to if they do not abide by the terms and conditions of their contract, which can often be a lot easier to breach than people realise. After all, if you go over the mileage restriction that is in place, you can expect a hefty penalty. Moreover, if you wish to end your contract sooner than stated on your contact, you will also have to pay a fine to get out of it.
One of the major benefits of purchasing a truck outright for businesses specifically is the fact that they will be free to customise the truck in any manner they wish. This is especially important for companies who want to use their new vehicle to advertise their products and/or services to full effect. You can easily invest in vehicle graphics to ensure that your truck makes a big impact while on the roads. It is incredibly unlikely that you will be able to do this when leasing. In fact, you will need to hand back your truck in the condition it was given to you in.
The tax implications of buying or leasing a truck
Before concluding, it is important to think about the impact your decision is going to have in terms of your tax implications. It is worth noting that you can claim the cost of buying a truck as expenses against your income tax bill. The same can also be said if you lease a truck. So, the advantage stands from both perspectives. How you pay your tax will impact how you claim for your truck. For example, you can claim the truck as a capital allowance if you use the traditional accounting system.
Important factors to consider
When deciding between buying and leasing, there are a number of vital factors you must consider. This includes your financial situation. Make sure you assess your business finances, so you can determine what is going to be right for you. Buying a truck may be more appealing, but is this something you can really afford? If you are going to take out a loan to fund buying the vehicle, you should find out whether you will end up paying more overall due to the interest when compared with leasing and buying the van at the end of the agreement if you wish.
You also need to make sure you consider the costs on the whole. It is a good idea to look at the costs of running and obtaining the truck over a certain period of time, for example, for a year. This will give you a more accurate assessment of the monetary side of things. You also need to think about all of the other additional costs you may be subject to. This includes insurance and registration costs. Remember, you will also have servicing and repairs to fund if you buy the vehicle outright. Of course, these expenses are incredibly difficult to plan for, but it is important to set funds aside for them. You also need to conduct a considerable amount of research when determining how much you will need to pay in terms of insurance. This will depend on the type of truck you are buying and who is going to be driving it.
It is also critical to read all of the fine print, irrespective of the route you go down. Don’t assume that your best interests are in the mind of the creditor. You need to read every single sentence of the contract, and make sure you understand it all completely. The last thing you want to do is end up with a nightmare on your hands because you signed something you did not fully understand.
Finally, don’t dive right in and make a rash decision. It can be easy to do this when you need a truck added to your fleet urgently. However, rash decisions are often bad decisions, and you could end up with a truck on your hands that is not right for you, or a financial agreement that is way more expensive or restrictive than you expected.
As you can see, there is a lot that needs to be taken into account when determining whether to buy a truck or lease one. There is no right or wrong answer. It is all about determining what is right for your business and your situation. Make sure you carefully consider the impact each option is going to have on your operations, finances, and taxes, and this should guide you in the direction of the best option for you.