1. Missed the live Ask the Expert event?
    Not to worry. Check out the archived thread of the Q&A with Ken Hutcheson, President of U.S. Lawns, and the LawnSite community in the Franchising forum .

    Dismiss Notice

Lease or buy your truck

Discussion in 'Business Operations' started by scott's turf, Jun 18, 2002.

  1. scott's turf

    scott's turf LawnSite Senior Member
    from NH
    Posts: 949

    How many of you lease or buy your trucks? What do you think the advantages and disadvantages are to each?
  2. LawnLad

    LawnLad LawnSite Senior Member
    Posts: 738

    For a good answer, you'll have to have someone run the numbers for you on the financing - lease rates versus interest rate on a purchase.

    I buy trucks and depreciate them. Ideally I would turn them over when I'm done depreciating them. I'd rather have an asset and liability on the balance sheet than an expense on my income statement (leasing is expense).

    I would lease if I needed a piece of equipment or truck for a short period of time - less than year. Some companies will lease trucks for certain seasons. Maybe a van is used during heavy annual planting and bed maintenance times but would sit the rest of the year. So if you need to mobilize an extra crew for a short period of time during the year, leasing might make sense. Sidewalk crews for winter work would be another example where you might lease a 2wd pick up or van for five months.

    I'm leary about leasing long term due to damage issues, plowing, etc. I know guys do it, it's just not in my comfort range. I don't want some pip squeek with a clip board at the end of the lease dinging me for normal wear and tear, running up my costs. I'd rather take the hit, if there is going to be one, when I sell it on my own. Maybe it's a control thing.
  3. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    Great answer, LawnLad..

    ... if you have the cash, I would say just buy it.

    my 2 cents though

    MATTHEW LawnSite Senior Member
    from NE OHIO
    Posts: 665

    Sometimes leasing can save you a bundle if you "assume" someone elses lease. In our local paper, there's always 1 or 2 trucks for sale or assume lease. They put down the big down payment and you just pick up the monthly.

    That's what I did and it worked well. I leased for a year and called the bank and told them I might want to do something else. They offered me a buy out with a 5% rate.
  5. GroundKprs

    GroundKprs LawnSite Bronze Member
    Posts: 1,969

    You need the advice of, or the knowledge of, an accountant to determine which is best for your situation. An accountant will generally advise a lease, because all monies paid out for the year can be expensed on tax returns.

    If you went out and paid cash for a $30K truck, you would take up to 12-14 years to fully depreciate it on your taxes. You've put all the money out, but need years to claim it as expense.

    But if you lease the $30K truck, your lease payments are lower than a finance payment, and you can expense every cent of the lease payments (less a small exclusion amount, per tax regs). At end of the lease period, you just purchase vehicle at price agreed at beginning of lease, then begin depreciation on taxes. Or sell the vehicle and lease another new one.
  6. BigJim

    BigJim LawnSite Senior Member
    Posts: 382

    Leasing is fine but check if it includes the dealer doing all the maintenance,down here they offer cheap leases on vehicles, then sting you on the maintenance,which your tied into as part of the lease.You can also buy the vehicle at the end of the lease for its residual value,if you dont want to upgrade its a cheap way to aquire a vehicle,but run the figures past your accountant first to see whether buying or leasing is the best option for your circumstances.
  7. Brickman

    Brickman LawnSite Bronze Member
    Posts: 1,249

    Another thing to think about on leasing. You are tied into the mileage thing with them. For me because I have only one vehicle a lease would never work. A lease will normally give you 12K miles a year, and you can write it for 15K. I drive around 50K a year, so a lease would never begin to work for me.
    What about the scratches, dings, dirty carpet and on and on that you will get screwed for at the end of the lease?
  8. Tony Harrell

    Tony Harrell LawnSite Senior Member
    Posts: 739

    Just a ditty about leasing. Leases are negotiable, most consumers don't realize that. The bean counters come up with the formulas to get the residual value they want after the lease. You can negotiate if you want to take the time and hound them. Seems like the Prez. speeded up the time table for depreciation so it might be better to buy. Check with a qualified (stipulated because of global crossing, enron, worldcom, etc...) accountant.
  9. RMDoyon

    RMDoyon LawnSite Member
    Posts: 230

    I thought highway vehicles were depreciated over 5 years?

  10. B. Phagan

    B. Phagan LawnSite Member
    Posts: 95

    Speaking for me, I am an advocate of purchase vs lease due to ususally higher costs of leasing and the unknowns such as FMV at the end of the lease, mileage limitation, insurances, etc.

    Some sales people convince us that lease is better because it never hits the balance sheet, saves in cash flow, etc but keep in mind it does matter what happens at the end of the lease as to how it affects your books. Dollar buyouts at the end do not constitute a TRUE lease but a conditional sales agreement.

    Crunch all the #'s relative to down payments, then payments, read all the fine print and if you still need help, consult your CPA....a great website is www.financenter.com for looking at the numbers. Leasing may be better from a cost standpoint but not often.

    In addition, older trucks shine just as good as new trucks and without the 20% depreciation when you drive it off the lot!

Share This Page