A Look at Truck Loans Vs. Truck Leasing

When it comes to operating a transport business, there are many things you have to consider. There are numerous calculations you’ll have to do when it comes to comparing your expenses versus profit etc. One of the most challenging decisions you’ll have to decide would include whether you lease or purchase a truck. So, we will now take a closer look at both these possibilities so you can have a better idea on what is best for you. Find out more about hiring a truck from https://mhf.uk.com/.


Source: 88asiafinance.com.ph

Leasing is different from purchasing because the payments you make every month are for using it and not towards owning it. As a result, the cost of leasing is typically much lower than how much you’d have to pay if you were purchasing. With that said, there are some additional fees and charges that you’ll need to take into consideration such as the security deposit, down payment, processing fees, licensing and registration, taxes etc. However, on GST, you can still claim for tax deductions as well as lease charges”.

Maintaining The Truck

Next, you won’t need to pay out of your wallet for some of the repairs the truck may need since the lease would be covered by the warranty. With that said, you will still need to pay for some maintenance on your own such as tires, brakes, oil etc. At the end of the contract, you will be able to get a new truck or other vehicle. If you have a short contract, then the vehicle would likely be in great condition, so the cost for leasing another vehicle would likely be a bit less.

Lease End

Source: mhc.com

Next, you will have to consider that most lease terms have a particular mileage limit. However, with that said, before the contract is settled in the beginning, you will be able to purchase more miles at a lower rate. So, it is advisable that you calculate how many miles you’ll need beforehand so you don’t end up paying higher rates. In the event that you have to end your leasing contract a bit earlier, then you’ll also have to pay an expensive fee.

Leasing Options

Source: pixabay.com

Operating – Operating leases are usually between 3 to 5 years. During this time you’ll be able to use the truck whenever you need to but it will still belong to the company that you purchased it from. However, your payments would not be shown on the balance sheet.

Finance – This type of lease is like an operating lease, however, at the end of the lease you can purchase the vehicle if you wish. The main benefit of this finance lease is that you will end up spending less money on taxes. The downside is that the truck won’t be an asset since it would not have increased inequity while you were using it.

The Pros

  • At the end of the lease, you can choose a different vehicle
  • You can lease a vehicle that you can’t afford to buy
  • According to your state, you can possibly get a tax deduction
  • Warranty is already covered
  • You don’t have to negotiate when it is time to trade in your truck or sell

The Cons

  • There is a limit on the mileage
  • If you need to terminate the contract early, it is costly to do so
  • Lack of equity

Is it best to lease?

There are many tax related benefits of leasing for business owners. However, if you’re doing so, you should keep your usage between 12,000 to 15,000 miles to minimise damage. This will ensure that you get the best deal possible. Also, leasing is a lot more cost effective since the repayments and down payments are relatively low.

Purchasing A Truck

Source: pixabay.com

Businesses have found it more economical to buy fleets rather than lease them from industry firms.

One of the biggest advantages when it comes to purchasing a truck for your business is that you can claim for depreciation as well as get interest payments on tax. With that said, paying a vehicle loan when purchasing is significantly higher as opposed to the monthly payments when leasing. With that said, if you can increase your initial down payment or even trade in a high value vehicle, this can reduce your monthly loan payments. At the end of all of your payments, you will own the truck and it will continue to build equity.

Maintaining The Truck

Truck finance specialists at Credit Capital say, “when it comes to the cost of maintaining a truck, 87% of business owners pay attention to the cost to maintain the vehicle before committing to buying it.” They explain, “it is essential that you know how much it will cost to keep in great condition since this is necessary if you want to eventually trade or sell it for the best price.”


Source: pixabay.com

Chattel Mortgage – This is when the truck stands as security. With that said, after paying off the full loan and interest, you’ll have ownership. Also, you will be able to have full use of the vehicle once you start the mortgage.

Hire Purchase – You’ll also be able to immediately use the vehicle but will only own it, once the loan is fully repaid. When you purchase a vehicle through hire purchase, there are many tax benefits that you can receive.

The Pros:

  • You can modify the truck as you please
  • Build equity
  • You can drive over 15,000 miles
  • You can trade it in whenever you want
  • Even if you have credit issues, you can still access these type of loans

The Cons:

  • The cost. You’ll need to pay 30 – 60% more on the monthly payments in comparison to lease payments.
  • Depreciation will likely occur. This means that the vehicle may eventually be worth less than the remaining loan amount
  • Once the warranty is over, maintenance will be costly

Should you purchase a truck?

Purchasing a truck is more expensive due to higher monthly loan payments. As a result, you need to have the money available and be ready to properly maintain the vehicle once the warranty period is over. However, in the end, you’ll fully own the truck and it will be a great asset. You will also be completely free to modify your truck in whatever way you want to, which is not possible when leasing.

Writen by

Leave a Reply