Lease or Buy? Which One’s Fly?
As a skilled service professional in the trades, you need a lot of things beyond tools to make work, well, workable. But, you won’t find much success at all if you can’t get yourself or your employees from job site to job site. You face many decisions as a business owner. Some aren’t such a big deal, are made often, or the details involved aren’t too elaborate and numerous. But when it comes to the choice between leasing or buying a vehicle for your business, there’s a lot to consider. After all, you want to make the best decision for your company.
The PROs of leasing a vehicle or vehicles for your business:
- You get an edge with tax advantages because lease payments are a tax-deductible business expense. Plus, you have a little extra in your coffers at the end of each month. Leases, generally, have a lower payment per month than when you finance a vehicle purchase. Also, this can free up capital. Using company savings to purchase a vehicle or vehicles outright handcuffs you from having that money to use in ways that may be more important in making your business grow.
- The burden of repairs and heavy maintenance isn’t yours to bear. As the lessee, you are only paying for use of the vehicle. The lessor is the owner, and is therefore generally responsible for its major upkeep. And, you simply turn the vehicle in when the lease is over. There’s no hassle of selling or otherwise disposing of an unwanted business asset. Also, promoting your business isn’t off the table. Be sure to check with the lessor. Usually you can still wrap the vehicle with your company’s logo and information. Leasing is a great option for many companies, but not for all. It’s important to know the downside to it as well.
- You can still wrap your service trucks with your company's branding.
The Cons of leasing a vehicle or vehicles for your business:
- If your business takes you far and wide during its home maintenance and repair jobs, then a lease might not be right for you. Often times lease terms limit mileage to between 12,000 and 15,000 miles a year. If you consistently drive more than this every year, you could be charged up to an additional 25 cents per mile over the limit. That could really add up at the end of the lease.
- If you want a sweet custom ride, well . . . it’s much more difficult to customize a leased vehicle than it is to customize one you own. This may make it hard for you to have a vehicle that fits your company’s needs so your pros can get their jobs done.
- And, don't forget, there’s always small print. This could include early termination fees and penalties for excessive wear and tear. If, for any reason, you think you may need to turn your lease in early, it’s probably another check in the con column. Same goes for dings and dents. If you or your employees are rough and tough on your vehicles, then you should probably think twice. If the cons against leasing have piled up and are against it, maybe you should think about purchasing a company vehicle.
The PROS for purchasing a service vehicle:
- It’s all yours. You can do whatever you want to do to it. You own it. Put as many miles as you’d like on it. You don’t have to worry about scuffs, dings to the body, or spills on the upholstery from when your Starbuck didn’t quite make it to your mouth. You also can recoup some of your investment when you sell it.
- Put your stamp on it. You can customize the heck out of it. Custom paint and options to fit your needs. Go crazy.
- Tax advantages—again. The cost is a depreciable expense, and as a possibility, although I don’t see this happening with many professions in the home service industry, some hybrid and electric vehicles are eligible for tax breaks. But, as with anything, there are some negatives to purchasing a company vehicle.
The CONS of purchasing a company vehicle:
- You have to fork over more money. Even when financing, monthly payments are often higher than when leasing. And while a new vehicle may provide free maintenance and repairs for the first few years of financing, anything beyond that is an expense that rests solely on your shoulders.
- The hassle is all yours. When it comes time to replace the vehicle, you take on the headache of selling, trading, or unloading the business asset.
- Ultimately you know your business the best. Needing only one or two trucks for your business is one thing, but if you need a fleet, that changes the game completely. Do your research ahead of time and be prepared. Your business will grow when you’re informed and ready for its next level.
You need service trucks to keep your home service business running. Pick your ride with some thought, and your business will be good to go!