What is a commercial truck lease?
These leases are contracts that allow you to use a commercial truck for a specific period. In exchange for the use of the vehicle, you make monthly payments to the leasing company.
Leasing is an alternative to purchasing a commercial truck, but it differs from renting. While rental truck agreements typically last days or weeks, leases are long-term agreements, often lasting several years.
Instead of paying a rental fee, you’re responsible for making lease payments until your contract ends. Leased commercial trucks are usually available from automotive dealerships or fleet leasing companies. Depending on your needs, you can lease one truck or an entire fleet.
When deciding if you should lease a commercial vehicle, consider:
- What type of vehicle you need
- How much money you have to spend
- Your business needs
Leasing vs. purchasing
When you purchase a vehicle, you’re responsible for the initial costs, such as sales tax, a down payment and the monthly payments to your lender. Payments are typically made on a monthly basis. The vehicle belongs to you, but you have loan debt on it for as long as your financing plan lasts. This means you build equity as you pay off the vehicle.
Leasing is similar to renting in that you’re responsible for a monthly payment, but the payment goes to the leasing company instead of a bank or auto finance company. 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 often comes down to the difference in cost. When you lease a vehicle, you might be able to take advantage of some financial benefits.
Tax-deductible
Lease payments may be tax-deductible, reducing your overall tax burden. You may also be able to deduct the cost of oil, gasoline, tires and other business expenses related to operating a leased truck.
Lease-to-own deals
Some dealerships offer lease-to-own deals, giving you more flexibility. This means a portion of each lease payment goes toward the purchase price of the vehicle. Should you decide to purchase, you’re responsible for making a lump-sum payment at the end of the lease term.
Reduced maintenance costs
To ensure the leased vehicle is returned in good condition, many lease agreements include regular maintenance coverage. This can benefit your company, as you won’t have to account for truck maintenance when forecasting expenses.
Improved credit
Leasing a commercial truck may also improve your business credit. Making on-time payments shows lenders that you’re committed to meeting your financial obligations. Establishing a new account can also strengthen your credit history. This may make it easier to qualify for business loans and lines of credit.
Flexibility
When you purchase a commercial truck, you typically have to keep it for a long time. If you sell it shortly after buying it, you may not earn as much profit on the sale as expected.
In contrast, leasing allows you to use a commercial truck without making a long-term commitment. If the first truck doesn’t meet your needs, you can lease a different one when your original lease agreement expires.
If you need a commercial truck for a year-long project, for example, you can sign a one-year leasing agreement. Some leasing companies allow you to swap vehicles without signing a new contract, giving you even more flexibility.
Commercial truck lease costs
Although leasing offers many benefits, commercial truck leases still come with costs.
Lease prices
The cost of leasing a truck depends on several factors, such as the model and age of the vehicle. You may also have to pay for extra features or services as outlined in your contract. While leasing can help you reduce your monthly vehicle costs, you may end up paying more overall if you don’t buy it at the end of the contract.
Fuel
Paying for fuel is one of the biggest expenses associated with leasing a commercial vehicle. To estimate your potential fuel costs, it’s helpful to know the average price of diesel, the total miles you plan to drive and the fuel efficiency of the vehicle.
Assume you lease a commercial vehicle that gets seven miles per gallon of diesel, and you plan to drive the vehicle 25,000 miles. To calculate your estimated fuel costs with an average diesel price of $3.79 per gallon, follow these steps:
- Divide 25,000 by seven to calculate the number of gallons of diesel you’ll need. In this scenario, you’ll need 3,571.43 gallons of diesel to travel 25,000 miles.
- Multiply the number of gallons you need by the average cost per gallon. 3,571.43 x $3.79 per gallon is $13,535.72.
Repairs and routine maintenance
Leasing companies generally include routine maintenance in their contracts to ensure a vehicle remains in good condition during the lease period. Some companies also cover repairs.
However, you may have to pay for damage caused by speeding, reckless driving and other driver behaviors. Consider providing additional training to help truck drivers develop safe habits.
Commercial insurance
To operate the vehicle, you’ll need to cover driver and business liability by paying for commercial auto insurance. The cost of commercial vehicle insurance depends on the type of vehicle, varying liability limits and the number of trucks included in your plan.
Contract restrictions
Contracts often come with restrictions to limit wear and tear on the vehicle. For example, your lease agreement may require you to perform maintenance at specific intervals.
It’s also common for leasing companies to set restrictions on the number of miles driven each year. If you exceed the number of miles outlined in your contract, you may have to pay a penalty.
