Choose Between Financing and Leasing to Aid Your Vehicle Acquisition Strategy

Trucking companies need to have a plan for acquiring new vehicles so that there is regular replenishment of vehicles to keep the fleet healthy. They must strengthen their plans with suitable financing options that can facilitate the buying process. It is the task of the fleet manager to decide the best financing option for buying vehicles by working out the most suitable truck acquisition strategy. Several factors have to be taken into consideration when deciding on the method of arranging finances for purchase.  Let us explore how you can choose between purchasing, financing, and leasing.

Things to consider

Although the funding decision is primarily a financial matter, it is related to several other factors in areas of operations and corporate accounting that you need to understand well to take the most rational decision. First and foremost, you have to consider the frequency of vehicles replacement. There are defined vehicle replacement cycles that trucking companies follow by taking into account the financial status and operational needs of the business.

Since vehicles are assets to the company, the corporate accounting methods for assets will influence the frequency of replacement. Moreover, vehicle purchases are linked to the tax strategy of the company. The type of vehicle influences the method of financing that would be suitable for it. Some vehicles may be better suited for financing, while leasing could be better for others types.

Purchasing in cash

Buying in cash is the cheapest option as no interest and financing charges are involved.  Moreover, it gives opportunities for availing some tax benefits and can even lower the cost of insurance by agreeing for higher deductibles that cannot be done when opting for financing schemes. However, draining heavy cash for purchasing vehicles may not be the best way of utilizing the money for business as it can be used for better returns in some other areas of business. This can result in loss of fund that offsets the apparent saving from cheap purchase.

Securing finance for buying

When you seek assistance from Go Truck Capital in buying trucks, you become the owner of the vehicle just like cash purchase without spending cash. Instead, you can pay back in small amounts every month without affecting the cash flow of the company. Financing may qualify for tax benefits arising from bonus depreciation and allied benefit for meeting the expense without making full payment for the vehicle. However, you should consider your ability to make monthly payments regularly before choosing this option.

Leasing vehicles

This is another method of financing the ownership of vehicle rests with the lessor and you pay the money for using the vehicle for a fixed term. It can be looked upon as usage fees that is the difference between the purchase price (less sales tax) and the residual value of the vehicle.  The vehicle has to be returned to the lessor at the end of the lease term.

Going by the industry trend, financing and leasing are the popular financing methods for truck purchase.