With the difficulty of attaining a loan, many transportation business owners start out by leasing their fleet instead of buying it. Is this a good move? The Tenney Group would like to provide you with some facts to consider as you think through the many benefits and problems associated with both leasing and owning your own vehicles whether you’re planning to someday expand your business or list your transportation business for sale, the right choice regarding buying or leasing can be a major factor in your meeting your goals.
Appealing to new business owners, leasing equipment is definitely an option that many consider. Instead of having to wait for a loan or another means of capital, business owners can hit the ground running—or, rather trucking. Leasing often eliminates the need for a down payment, with greater flexibility than many bank loans. If you decide to attain a leased fleet for your transportation business, you’re sure to enjoy the additional benefit of not having debt to balance out your cash flow.
In time, leasing can make upgrading to newer vehicles and offering greater variety of vehicles within reach. Such changes can increase your company’s attractiveness to certain customers, while also giving you the flexibility to respond to local market demands.
In the long run, leasing does have its down sides. Because business owners who sign lease agreements are required to pay throughout the lease term, there is little flexibility within that term. You’ll pay monthly fees each month, spending more money than you would have if you had purchased the same vehicles, but in the end, you won’t have anything to show for all your money. For transportation business owners who are considering selling, having a lease agreement to keep may be a negative for some potential buyers.
Even though purchasing vehicles means a large initial investment, part of the cost can be made up for by depreciation deductions or even being able to deduct the cost of assets purchased during your first year of business. Of course, vehicles decrease in value quickly; however, if you own them, you can potentially gain back some of the purchase price by selling vehicles individually or including their value in your business’s purchase price.
On the flip side, vehicle ownership can become a burden. In addition to the lack of appeal that comes with older vehicles, the number of necessary repairs goes up as mileage increases. If you choose to purchase vehicles for your transportation business, maintaining a decent fleet will require purchasing new vehicles on a regular basis.
Regardless of whether you decide to own or lease your vehicles, you’ll probably be able to attract a buyer looking for your precise situation. Transportation industry business brokers like The Tenney Group can help you identify and connect with the buyer that’s right for you and your transportation business.