Leasing a commercial truck

Leasing means that you agree to a contract allowing you to use a commercial truck. It’s an alternative strategy to purchasing a commercial truck, but it’s also different from renting. While rental truck agreements typically last days or weeks, leases are long-term agreements, typically lasting several years.

Instead of paying a rental fee, you’re responsible for a lease payment until your lease agreement ends. Leased commercial trucks are usually available from automotive dealerships or fleet leasing companies. You can choose to lease just one vehicle or lease an entire fleet if it suits your needs.

When deciding if you should lease a commercial vehicle, consider these factors:

• Length of time you require the vehicle for
• Costs of leasing vs purchasing
• Tax implications

Leasing vs purchasing

When you purchase a vehicle, you’re responsible for initial costs, such as sales tax, a down payment and the finance payments that follow. Payments usually occur on a monthly or four-week basis. The vehicle belongs to you, but you have loan debt on your vehicle for as long as your financing plan lasts. This means that you build equity as you pay the vehicle off.

Leasing is similar to renting in that you’re responsible for a monthly payment, but the payment goes to the leaser of the vehicle in exchange for your use. Rather than building ownership equity, you return the vehicle at the end of your contract.

Advantages of leasing a commercial truck

Leasing a commercial truck instead of purchasing comes down to the difference in cost. When you lease a vehicle, you can take advantage of some financial benefits.

Tax-deductible

You can often deduct the loan interest of a purchased vehicle, and lease payments are also tax-deductible. You can usually deduct the entire cost each month from your taxes, since it’s a business expense. This reduces your overall tax burden.

Lease-to-own deals

If you think you may choose to purchase the vehicle at the end of your lease, many dealerships offer lease-to-own deals. This means that part of your lease payments go towards the purchase price, and you’re responsible for a final larger payment should you decide to purchase. This is an attractive option for those who don’t have the credit to purchase a vehicle yet.

Reduced maintenance costs

As a way of ensuring the leased vehicle is returned in good condition, many lease agreements come with regular maintenance and sometimes even major repair coverage. This also benefits you as the lessee, since it reduces the maintenance costs you’re responsible for.

Ease your debt ratio

Leasing a vehicle can be an advantageous choice for your debt ratio and credit. When you’re responsible for a large loan from purchasing a vehicle, it limits your ability to acquire credit for other parts of your business. A lease allows you to use the truck for your business, without taking away significant credit from your other business needs.

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Flexibility

While purchasing a vehicle may mean you’re stuck with it for a long time, leasing lets you use the vehicle for far less commitment. You can often arrange lease lengths to match your business needs.

If you need a commercial truck for a year-long project, for example, you can acquire a lease for just that year. If your chosen vehicle doesn’t meet your needs, you can often upgrade or swap vehicles by renegotiating your lease agreement.

How much to lease a truck? Commercial truck lease costs

Although leasing comes with many benefits, commercial truck leases still have their own associated costs to be aware of.

Lease prices

The cost of leasing a truck depends on factors, such as the model and age of the vehicle. Monthly lease payments can be less expensive than monthly finance payments for the same vehicle, but they can range from about $300 to over $1,000 monthly.

You may also be responsible for fees associated with extra services or features in your contract. While leasing is a good option for reducing monthly vehicle costs, you may pay more if you don’t buy the vehicle at the end of the contract.

Related: Understanding Fixed vs. Variable Expenses

Fuel

Fuel will likely be your most frequent cost. You can estimate your fuel costs by identifying average fuel costs, the vehicle’s fuel mileage and your average mileage. Your monthly estimated fuel cost is the result of this formula:

Monthly estimate fuel cost = (average mileage/fuel mileage) x average fuel cost

Read more: Small Business Fuel and Fleet Cards

Repairs and routine maintenance

Leasing services generally include routine maintenance in your contract to ensure the vehicle remains in good condition during the lease period. If you fail to have routine maintenance performed on your leased vehicle, it may result in contract penalties. Many repairs are also covered, especially if it’s a new vehicle still under warranty. Keep in mind that you may need to pay for repairs that are your fault.

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Commercial insurance

To actually operate the vehicle, you’ll need to cover driver and business liability by paying for commercial vehicle insurance. The cost of commercial vehicle insurance depends on the type of vehicle, varying liability limits and the number of vehicles on your plan. Typically, insurance costs average between $800 and $1,200.

Contract restrictions and rules

Contracts often come with restrictions and rules to limit the use and wear of the vehicle. Maintenance completion, as mentioned earlier, is sometimes an obligation of the lessee. The most common restriction is driving mileage. Leasing services generally limit driving to between 10,000 or 12,000 miles per year.

Commercial truck leasing FAQs

What are the disadvantages of leasing a commercial truck?

Leasing is a good option, but it comes with a few disadvantages. You may pay more in the end on leasing costs than on financing, and you may have high insurance costs. Contracts can come with restrictions, often meaning that you can’t customize your vehicle and may face penalties if you opt to cancel your lease early.

Can you end a lease early?

If your commercial truck no longer suits your needs, you can end your lease contract early. Before canceling your contract, however, check the agreement to see if you’re subject to early cancellation penalties.

Can you negotiate a lease?

Just like when you buy a vehicle, you can negotiate a deal when you lease a commercial truck. You can negotiate factors, such as the lease term, monthly payment, security deposit and maintenance coverage. You can also opt for incentives or special features offered by the leasing services.