Trying to decide whether it’s smarter to get a commercial truck loan or lease to secure your first or next big rig truck and trailer, box truck, tow truck, construction equipment, or light and medium duty fleet?

There are several key factors to consider between commercial truck leases and loans. Many truckers call in asking, “What is a finance lease and how does it differ from a loan?” So, we’ll take a look at these differences below.

#1. Use

A leased truck is the property of the company issuing the lease. They own the vehicle and are renting it to you.

Leases are structured for a fixed period of time, which usually ranges from one to three years. Monthly payments are required for the complete term of the contract. If you want to get out of the lease early, an early termination fee will be applied and your security deposit will be forfeited.

The benefit of leasing is having increased flexibility and less long-term commitment to a vehicle. If you secure work for a certain type of vehicle that you’re not sure you’ll need three years from now, leasing could be the best option.

You should also consider the wear and tear you anticipate the commercial vehicle sustaining. Many leases come with mileage restrictions and mandatory maintenance guidelines to keep their vehicles up to par.

Lease with NO mileage restrictions

If you know that you’ll need a certain type of commercial truck or equipment for the long-term then securing a loan to purchase it is the best route. Since a traditional truck loan allows you to take ownership of the vehicle immediately, you can use it as much as you want to with no restrictions. Once you pay the vehicle off, you will continue to generate income from the use of that vehicle without the cost monthly payments.

#2. Cost

Leasing a commercial vehicle is similar to paying monthly rent. Each of your monthly payments meet your contractual agreement for the use of commercial vehicle, but no ownership equity is ever realized.

One positive for leasing commercial vehicles is that it usually requires less upfront cash and lower monthly payments than loans.

On the flip side, insurance rates for commercial truck loans are often less than insurance for commercial truck leases, which is a savings advantage. And in 2019 with the rise truck insurance rates and the threat of 5X higher insurance rates, this is not a factor that can be underestimated.

Plus, when you purchase a vehicle and pay it off, you continue to generate monthly revenue from the use of that big rig, box truck, tow truck, etc. with zero payments. This is an easy way to realize extra profits; like getting an automatic raise without even increasing your workload.

Bottom line, in the short-run, you will save money on a lease – or, perhaps not in light of insurance implications. In the long-run, you’ll build equity, own an asset, and reap the rewards of paying off your vehicle for years to come with a good traditional commercial truck loan.

#3. Taxes

With a lease, you are NOT the owner of the equipment, therefore you deduct the monthly payment as an expense each month on your taxes.

With a truck loan, you are the owner of the commercial truck so you will deduct the depreciation expense of the vehicle or equipment on your taxes as the end of each year.

#4. Short-term Implications

If you know that you want to use a certain commercial truck or piece of equipment for the long-term, then you should go with purchasing the vehicle with a truck loan, assuming you have a financial situation that makes it feasible.

However, if you anticipate only using a certain type of commercial vehicle for a couple of years, then getting a commercial truck lease may be the best bet. If you have less money to put down then that’s one more reason to consider a lease.

#5. Long-term Implications

With a commercial truck loan, you gain equity each month you make your payment until you own it free and clear. And, when the truck has been paid off, you’ll own an asset you can make more money on with no monthly payments.

And when you decide to purchase a newer vehicle, you will have your current truck to use as a valuable trade in.

When the lease period expires, you simply turn in the vehicle.

Bottom line

In many cases, if you have been in business for at least 2 years, have good positive cash flow, are purchasing a newer vehicle and have reasonable credit, a down payment will not be required and you can get affordable payments. If all this is true then getting a commercial truck loan is your best bet since you can always sell the vehicle if you don’t want it later.

It’s proven that career truck drivers experience the most benefits from owning their own commercial trucks. The long-term benefits of ownership outweigh the short-term benefits of commercial leases, for most.

Either way you go, CFF is America’s most trusted commercial vehicle and equipment financing company with the best options for traditional loans and leases in the market.

Talk directly with one of our financing pros and get started with a credit approval for new semi truck financing in as little as 2 hours. CFF’s main phone number is (469) 208-4701.

To get pre-approved, fill out our Fast App credit application online by clicking here:

About Commercial Fleet Financing, Inc.:

At Commercial Fleet Financing (CFF), our pros have given smart advice to fleet owners and owner-operators in the transportation, moving, towing or construction industries for more than two decades. With CFF, finding the right financing solutions is a phone call away and most borrowers secure commercial vehicle financing with ease. To talk directly with one of our finance pros and get started with a credit approval in as little as two hours, CFF’s phone number is (469)-281-2962.