Today, Houston Truck Deals will focus on the leasing and some of the advantages of buying a semi trailer or tractor unit through financing.
Leasing holds many advantages to would be purchasers of commercial vehicles and equipment. Outright purchase of a tractor trailer unit is impossible for many operators, however even where you have the funds available to pay for a vehicle outright there are compelling financial and business reasons not to do so.
Leasing has several advantages which we shall take a look at here:
Zero or Low Upfront Costs
Even if you are buying a used trailer, or a very old tractor unit, you are going to be shelling out a lot of cash. With a lease you can get yourself behind the wheel of a reliable and up-to-date model without the need for a large deposit. Many lease deals do not need you to come up with any money upfront and those that do require some payment upfront require at most only a fraction of what you would need to pay if you were buying a truck outright.
If you are buying equipment outright you are tying substantial sums of money up in fixed assets which will no longer be available to your business should you need it. By keeping your capital liquid you reduce the risk to your business – ultimately running out of cash is fatal to any business.
Tax Breaks
If you take on a lease you gain a double bonus from the IRS. First of all, you will either be able to claim tax depreciation on the tractor trailer equipment or the finance company granting the lease will do it for you and pass the benefit on to you through reduced lease payments. Either way, you have all the tax breaks as if you had gone out and bought the equipment yourself and put it on your company balance sheet.
The second major tax break with a lease is that the interest element is tax deductible, which means you are able to reduce your tax liability even further. This is something you cannot do with an outright cash purchase.
Break Clauses
If you buy a tractor unit and then a year later decide you do not need it or financial circumstances arose such that you need to get your money back out of the unit, unless you can sell the equipment you are stuck with it. If you lease equipment you can ask for lease breaks or break clauses to be included in the agreement. A break clause will allow you to cancel or break the lease and return the equipment, usually without any financial penalty being incurred. In essence, you are passing on some of the business risk to the finance company and ensuring your business maintains its options.
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