Why Leasing a Truck for Business Makes More Sense
It’s easy to get carried away and want to purchase the most well-equipped truck out there. But if you are a prudent business person, it’s important to be realistic and consider the long-term consequences of maintaining your own fleet. Oftentimes leasing a truck for business makes more sense than owning. Here’s a list of why we think leasing could be more suitable for your company.
You Don’t Have the Cash
Leasing offers more savings in the short-term. This is particularly significant in the early years of operating your business and your budget is tight. Unlike purchasing a vehicle, there is no huge upfront capital outlay or down payment to worry about. A lease can be a wiser decision from a cash flow perspective. The initial savings could be used elsewhere such as marketing or expanding your business. With renting, the cash expense may be limited to only the security deposit, plus the initial lease payment.
It is also good to note that while buying a vehicle is considered an asset, it can also depreciate by up to 30 percent during the first year of ownership.
According to Chartered Accountant Rick Gargarella, a Partner with Collins Barrow LLP in Vaughan, “When you buy, you are using a liquid asset to buy a long-term asset, so you have lost the opportunity to use that money for something else. You are also buying an asset that is going down in value.”
You Have Bad Credit
If your business credit has been damaged, the bank will not offer you a good rate on the loan. This could mean straining your finances that you otherwise could use for business operations. Defaulting on a truck loan will not only damage your credit rating, it will seriously affect your ability to meet other financial obligations.
You Don’t Want to Be Responsible for Repair and Maintenance
Next to fuel and equipment, maintenance is one of the costliest aspects of owing a vehicle. You need to keep up with preventative maintenance such as changing oil and filters. Failing to do so can increase contaminants and shorten the engine life. You also need to keep the transmission in tip top shape to avoid hefty repair bills. The average cost of getting a transmission replaced on a car can be more than $3,500. Leasing can save you the headache of having to cough up money to pay for routine maintenance which may challenge you financially.
You Want to Take Advantage of Tax Deductions
Monthly lease payments are tax-deductible as a business expense if you use your motor vehicle in your operations. Keep in mind that there is a limit on the amount of the leasing costs you can deduct so be sure to consult with your accountant or visit the Canada Revenue Agency for more information.
According to Turbo Tax Canada, “If you lease a vehicle, you may also choose the standard mileage rate in the first year but once you use the standard mileage rate you must use it for the life of the lease. With the standard mileage rate, your business mile deduction will be based on 54 cents per mile for 2016 (down from 57.5 cents in 2015). You can also deduct business related parking fees and tolls. Since you don’t own the car, you can’t depreciate it but here’s the good news! You can deduct the business percentage of your lease payments. So if your yearly lease payment is $4,200 ($350 / month) and your business use percentage is 80%, you may be able to deduct $3,360 on your tax return for that year.”
You Are an Early Adopter
As competition among leading car and truck manufacturers heats up, new technologies are often introduced as a way to differentiate their brand in the market. If keeping up with the newest technology is very important to you, then leasing can be to your advantage. After that lease expires, you’re free to choose a newer model at a cheaper rate than purchasing one.
Ford is one trailblazing company that keeps on developing new technologies. For their F-Series, they have recently launched innovations such as the Adaptive Steering, a technology that makes backing a trailer into a parking area or navigating tight, low-speed maneuvers easier, and BLIS which helps increase driver awareness of obstacles and traffic.
Your Business is Seasonal
A vehicle that you simply park inside a garage is a waste of resources. You need to keep it on the move not only to ensure that it stays functional but also to get a better return on your investment. If your business is seasonal or you often work on timebound projects, it is better to lease than have an excess number of vehicles that cost money to maintain.
Renting work trucks offers flexibility meaning you can free up finances for other business expenses. You have the option to keep vehicles only for as long as necessary and you only pay for what you need. If your business peaks at certain periods or tapers off at other times, you can decide on your long-term rental requirements without committing to maintaining a fleet.
Do you need work trucks or cars for your business? With a fleet of over 800 vehicles and growing, Thomas Solutions has a wide array of work vehicles for lease or rent. Whether you are in Hamilton, Niagara or anywhere in Southern Ontario for that matter, we would welcome the chance to see if we can help you with your fleet needs. Contact us today.