If I had a nickel for every time somebody asked me this question, well, I probably wouldn’t be doing Monday Transportation in Minutes. Welcome to Monday Transportation in Minutes. It’s a massive question that I have been asked thousands of times over our 25-year career here at Commercial Fleet. “Matt, should I buy or should I lease my equipment?” That seems to be the big question. And I can’t answer the question unless I really understand four things about your buying patterns and the needs and desires of your business and how you’re going to use the equipment.
The first is, are you a payment shopper or are you an equity builder? Because if you’re a payment shopper, you probably need to lease your equipment. Leasing will have a residual value or a buyout option at the end. That means that you will finance less. That means your payment will be lower. If you want to buy the equipment and finance the full amount, your payment will often be higher than leasing. So the first thing is, are you an equity buyer or are you, monthly payment buyer?
The second thing is, do you like new equipment? Because most people who lease new equipment. New equipment keeps you often out of the repair and maintenance game. It’s really one of the biggest things that we’ve seen is people who love to own their equipment, let’s say at the end of four, or five, or six years that equipment’s paid for, and they feel really good that they don’t have a monthly payment. But guess what? It starts to open up the door for repair and maintenance problems. A truck breaks down because now it’s older, the mileage is high, it often impacts driver retention. And when that truck breaks down, both the driver’s not making money and the customer’s not getting the freight, and the customer usually doesn’t care that they’re not getting the freight. They want the freight. So if you’re thinking about newer equipment, you might think about leasing.
The third question I have to ask you is, how much do you care about the warranty? Because leasing newer equipment will often keep the equipment under warranty and that helps you sleep better at night. As soon as that warranty runs out at, let’s just say at 500,000 miles at year four or five, now without an extended warranty, you’re on the hook for those repairs. But if you buy newer equipment and lease it, you can keep the warranty going. And the last thing is, what do I do about taxes? Look, on a lease, you deduct the monthly payment at 100%. On a loan, you take the depreciation benefit.
Don’t forget, as we’re coming closer to the end of the year, whether you do a lease or a loan, it doesn’t matter for your section 179 deduction. It doesn’t matter how you do your financing, you can still deduct the purchase price of that equipment up to a certain amount for 2019. So that becomes the four questions and if I can get the answers to those questions, so for example, if you told me I’m not a payment shopper and I love building equity, then I’d say you got to do a loan. But if you told me I need a lower monthly payment, I want it to stay under warranty, and I like the idea of replacing my vehicles every three years, I’d say let’s do a lease. So those become the answers to the four questions of the primary question that I’d been asked a thousand times. Now stick around for your bonus tip.
Thanks for watching this far. Here’s your bonus tip. At Commercial Fleet, we’d love to do volunteer projects. We want to give back to the community. And for many years, we’ve done a drive, a toy drive for Toys for Tots, but this year we’ve changed it up a little bit. We’re taking donations for Medical City Children’s Hospital in Dallas. If you look in the link in the comments section here, it’ll give you a link that you could send cash or unwrapped gifts for a child that might be sick during this holiday season. We need your donation by December 13th. We’ll give you the link, just follow the link. You can send the gift card, you can send cash. You can send the gift, the present if you’d like unwrapped, and we will make sure that it gets to these children at Medical City Children’s Hospital in Dallas. We hope you take part in it. It’s a big initiative for us and we appreciate everything you’ve done for us and for these kids. Thanks.
Learn more here: https://commercialfleetfinancing.com/donate