Which is Better for You: Leasing or Renting Your Next Truck?

Do you require delivery trucks for your company?

Leasing and renting are the two best options for providing your company with the trucks it needs to make deliveries on time.

Choosing the best path for your company isn’t as simple as it sounds. In fact, there are numerous factors to consider, and each approach has advantages and disadvantages.

Before we continue this important discussion, make sure you’ve also joined the scmguide telegram channel, where I share many more supply chain management posts.

Rentals

It is possible to save money by renting trucks.

The rental company will maintain the unit, which means you will save money on maintenance.

If it breaks down, they’ll either fix it and get it back on the road, or they’ll get you another truck.

When you rent a truck, it is usually for a limited time.

Renting is more expensive than leasing, but because of the short time commitment you have to that truck, it poses very little risk to your company.

It will save you money on maintenance and upkeep.

Key advantages:

• Lower your risk. Mechanical failures are not your company’s fault.
• Manage your expenses wisely. Renting allows you to return the equipment whenever you’re finished with it, without having to worry about reselling or depreciation.
• Maintain compliance. Because the rental company is in charge of adhering to specific federal and local regulations, that’s one less worry off your company’s plate.
• Trade in or up whenever necessary. Again, your company does not need to be concerned about reselling. When you need another truck, simply sign a new rental agreement, perform a walk-around inspection, and you’re ready to make more deliveries.

Considerations:

• Renting should be viewed as a temporary solution.
• Renting is usually more expensive than leasing.
• You are restricted to the rental truck’s specifications.

Leasing

Leasing a truck implies that you intend to keep it for an extended period of time, typically 5 years.

Leasing a truck is an excellent option because it typically requires no money up front and eliminates the need to worry about returning it on a regular basis (as you would with rentals).

If you are leasing a truck and something happens in your business that causes you to no longer require the truck, you must still pay the remainder of the truck’s value or pay an early termination fee.

This can be detrimental to your business, especially since having to return the equipment early likely means you’re already in a bad financial situation.

Leasing also allows you to customize the truck to meet the needs of your company.

Engine and transmission type, body dimensions/material, lift-gate style, temperature control, aerodynamics, and other options are available.

Key advantages:

• Save money. When you lease a vehicle, you don’t have to worry about it depreciating over time. This should, in fact, be factored into the cost of your lease from the start.
• Be effective. You won’t have to worry about maintenance costs or compliance issues with a full-service lease because the leasing company will handle these for you.
• Long-term commitments may include buyout clauses or early termination fees.
• Full-service leasing can save your company money on maintenance and downtime.

6 most significant advantages of leasing a truck

Here are six of the most significant advantages of leasing a company truck rather than purchasing a new one, as well as some additional information.

More affordable and higher profits for your company

One of the primary benefits of leasing a commercial truck is that it does not necessitate a large capital investment. Unlike purchasing a vehicle, leasing has no hidden costs such as taxes, towing, overhead, and other expenses.

Aside from the large upfront costs, truck owners must also cover finance charges and pay sales tax.

Because your monthly payments are lower when you lease a commercial truck, you can increase profits for your company.

As a result, you will be able to keep more money in the bank account of your company.

Furthermore, having less paperwork to do allows you to devote more time to your business.

There are no depreciation costs

You will not be affected if the value of your leased truck decreases due to depreciation.

In other words, you won’t have to worry about depreciation costs, which are an issue when purchasing a new truck.

Leasing does not reduce your company’s net worth and does not appear on your CFO’s balance sheet (chief financial officer).

You might also like:

• 11 Effective Ways to Improve Your Logistics Management Process Performance
• 6 Ways to Manage Your Logistics Operations Efficiently

Lower maintenance and repair expenses

Another advantage of leasing is lower repair and maintenance costs.

Repairs and maintenance costs, such as oil changes, tires, and routine inspections, are covered by a full-service lease.

When you own a truck, however, you are responsible for all repairs and maintenance.

It relieves you of the problems associated with vehicle ownership

When you lease a truck for your business, you avoid the hassles that come with owning a vehicle.

For example, you won’t have to deal with potential compliance issues, fees associated with replacing drivers, or training costs.

Another issue with owning your own company truck is that drivers will leave to work for companies with more advanced equipment.

Increased flexibility

Because many leasing companies do not require a down payment, leasing is more flexible than buying a truck.

You return your leased vehicle at the end of the lease period.

This also gives you more freedom.

Furthermore, the terms of a lease include a fixed, consistent payment, which can free up capital and make your finances more flexible.

This is especially useful when you need to make business investments or pay for emergency repairs.

Roadside assistance available 24 hours a day, 7 days a week

The peace of mind that comes with knowing you’ll be rescued if your truck breaks down is a huge benefit of leasing.

When you purchase a full-service lease, you can let your leasing company handle vehicle breakdowns, as opposed to owning a truck.

When your truck breaks down, you can contact an experienced mechanic who is on call to handle whatever repairs are required.

These experts have everything needed to handle flat tires, towing, and other issues.

Which is superior?

Choosing which option is best for your company is based on several factors, including:

How long will you require the truck?

Short-term: If you’re just getting started or if this is just a temporary replacement and you don’t expect to need the truck for more than a few months, renting is probably the best option for your business.

Long-term: If you already have contracts in place or have a long history of consistent business and know you’ll need the truck for several years in a row, a lease is the most cost-effective option.

Do you want to buy something?

Yes, leasing companies provide a lease purchase option, which allows you to lease the truck for five years with the option to purchase it at the end.

They can apply a percentage of the lease payments to the scheduled value, leaving a balance for your company to purchase the truck at the end of the term.

No: If you’re not interested in buying the truck, the length of time you’ll need it should be the primary deciding factor in your decision.

Key Advantages: Owning a 5-year-old truck provides you with temporary payment relief.

Considerations:

• When operating older equipment, maintenance and rental costs are exponentially higher.
• When there is a truck problem, the downtime and number of late deliveries increase.

Making the decision to rent

If you decide to rent a truck, the first step is to find a reputable rental company that carries the trucks you require.

You will be able to rent a variety of vehicles as a business, including cargo vans, stakebeds, box trucks, refrigeration trucks, studio trucks, semi-tractors, and more…

Most rental companies will have a number of vehicles on their lot for you to inspect and select from.

Here are some things to think about and keep in mind:

• Does the rental company have your type of truck on hand when you need it?
• When the trucks are picked up, are they clean and in good working order?
• How quickly can they get you on the road after you pick up the truck?
• Are they meticulous in documenting pre-existing damage to the rental truck?
• Does the rental company have different rates for each day, week, and month?
• What are they, and do they fit within your financial constraints?
• Does the rental company offer a variety of lift-gate styles?
• Do they have any insurance requirements for renting their trucks?
• Does the rental company offer short-term insurance?

Inquire about how frequently (if at all) you will need to bring the vehicle in for a service check.

 Ascertain that they accept responsibility for upkeep and repairs.

While on the lot, you should speak with the rental agent about all of your options.

For example, you might be looking for a 24′ Box Truck with a Lift-gate that day, but all they have on the lot is a 24′ Stakebed or a 24′ Refrigerated Truck with a Lift-gate.

If you explain what you’re carrying and how you’re loading/unloading the product, one of these other types of trucks may be able to help you achieve the same goal as your first choice.

While your situation may not be as straightforward as this one, if you are clear about what you are transporting, how you are loading/unloading the product, when you need it by, and where you are transporting the product to, the rental agent can make recommendations on which truck will work best for you and when you can pick it up!

You might also like:

• 7 Ways 3PL Can Reduce Your Logistics Costs
• What is Route Planning? – Everything You Need to Know

Selecting a lease

If you’ve decided that full-service leasing is the best option for your business, you can start looking into which leasing company is the best fit for you. Here are some pointers for selecting the best leasing company:

• Look for a company that has been in operation for a long time and has a good reputation in the industry.
• Before providing a lease solution, ensure that the salesperson takes the time to understand your company’s needs and processes.
• Leasing eliminates hidden costs associated with purchasing, such as acquisition/disposal, administrative overhead, rentals, lost sales, lost customers, driver overtime, residual value risk, and so on. When presenting a lease solution, make sure the lease salesperson considers this.
• Inquire about buyouts and early termination penalties.

As previously stated, your leasing salesperson should consider certain factors (such as the amount of usage, miles driven, weight of product, and number of stops) when determining the length of term and operating costs.

Transporting liquids, for example, will put much more strain on the truck’s components, resulting in a higher running cost than transporting foam. This should be accounted for by the lessor in the lease.

Finally, consider the following:

There are some final considerations that go along with using trucks that you don’t own, whether you rent or lease them. These include:

• What are the truck’s and its operator’s regulations? As a renter/lessee, are you liable for this? Is the company’s owner accountable? This is a great question to ask before signing any contract.
• Who is liable if the truck breaks down while in use? Is the expense covered by the rental/leasing company? Are you liable in certain circumstances? What is the rental/leasing company’s response time to such incidents?
• How frequently do you need to have it serviced? When should it be dropped off, and when will it be ready? Does this conflict with your delivery schedule? Is there an option for on-site maintenance? What about pick-up and drop-off?
• Does the rental/leasing company provide replacement trucks if the lease truck fails? How readily available are those replacement trucks? Do they closely resemble the specifications of the leased truck?
• Is a Commercial Drivers License (CDL) required for you and/or the drivers to operate the vehicle? What are the benefits of using a CDL truck over a non-CDL truck?

Conclusion

Renting is more expensive, but because to the short time commitment, it is less risky.

Leasing a truck means you plan to keep it for 5 years or more.

Taxes, towing, overhead, and other expenditures are not hidden costs when leasing a commercial truck.

Full-service leasing also lets you customize the truck to your business’s needs.

This should be reflected into the lease cost from the beginning.

When you lease a truck for your company, you avoid the hassles of owning one.

A lease has a fixed, constant payment, which can free up capital and increase financial flexibility.

Rather of owning a truck, you can purchase a full-service lease.

The ideal solution for your company depends on various aspects, including how long you’ll need the vehicle.

Owning a 5-year-old truck helps with payments.

Some rental companies have a selection of vehicles for you to choose from.

The hidden costs of purchase are eliminated by leasing.

If you found this article useful, please share it with your colleagues and join the scmguide telegram channel to receive updates on new articles from this blog.