The age old question when it comes to equipment is should I rent, or buy my own? Both options have benefits and drawbacks. Ultimately the decision can be made by weighing the benefits of each. There are quite a few factors that you should consider before making a final choice.
The purchase of a vehicle is going to set the company back a pretty penny. A careful look at the finances of your company can present a good picture of what sort of money is available for the purchase. If there are enough operating funds for an outright purchase, ownership is a clear winner.
If there is not enough money to outright purchase the asset, the question becomes which can we afford; a loan, or a rental payment? Loans tend to be more costly than a rental payment, but you can write off the depreciation value of the owned vehicle. If the company has a profile that lends itself to owing assets, and can afford the extra cost, owning may be the proper route.
In a case where money is tight but there is a need for the truck, then the lease is the better option. Leasing allows you to defer the initial down payment costs as well as expense the cost of the vehicle on a monthly basis. Owning will require you to carry the debt as a liability on the balance sheets and this might not be a good position for a company to be in if profit margins are tight.
Does the company have access to its own garage and fleet maintenance facility? If so, then the costs of owning a vehicle can be offset by being able to this work in house. Having the option to service the trucks yourself can lead to longevity of the vehicle. It improves your return on the investment by using the truck for a longer period of time.
If an in-house service option is not available, then you must remember to add the cost of maintenance to the ownership equation. Depending on the state of operation, these costs can be considerable. In this case, a lease could be more sensible if it includes a service package. Many leases include full service options that will allow you to keep the truck working at the cost of the rental carrier, not paying out of your own pocket.
Most leases carry a term of 2-5 years, depending on mileage and operating conditions. Technology can make huge leaps in that short period of time, particularly in the area of miles per gallon. When a rental truck is due to have its lease renewed, the truck can be upgraded to a newer model that will allow you to leverage the perks of the latest technology.
Owing a truck locks you into a particular year’s technology. This could be a good thing if the truck meets all of your needs and projected needs. Weighing the possibility of technological advances in the near term versus the needs of the fleet in the near term can be a good guide to choosing ownership over renting. If you do not see a need for any of the new bells and whistles coming up, then there is probably no reason to not pick ownership.
Ultimately it is a matter of figuring out what best fits for the company at the particular time of the purchase. Remember, at the end of a lease you do not own anything. A lot of times you can end up owing money if extra mileage was put on the truck. In most cases, the benefits of ownership outweigh the negatives. Consider leases only in a case of immediate need without immediate funds.