Commercial Semi Truck Financing - Lease vs Buying

Published September 28, 2020 by WC Team

Commercial Semi Truck Financing – Lease Vs. Buying

Being an owner-operator and a small business owner, you have several factors to consider for your business. These considerations determine how you allocate your budget to financial resources. An example of this is deciding how you will get commercial semi truck financing for transportation solutions. 

Your research on semi-trucks purchase will bring you to two options – buying or leasing. The logistics of either choice depends on what your trucking needs are. For those who are just starting their business, it can be a tricky situation to confront. 

This guide will help you weigh your options and determine the best commercial semi truck financing option. 

Lease Vs. Buying – Which Is Better?

Leasing a semi truck has become a popular alternative to purchasing trucks with a loan. The cost of leasing comes under a wider range of budgets. So leasing is seen as a more cost-effective choice in comparison to buying a semi truck. 

Let’s take a look at what leasing or a buying decision means for your transport solutions. 

Leasing A Semi Truck

This commercial semi truck financing option is a lot like renting a house. An agreement is set between the lessor (owner) and lessee (borrower) for a while. Within this period, the lessee can use the lessor's semi truck for their business operations. 

Now that we know how leasing works let's see how you can benefit from it.

Lesser Money Up-Front

The obvious advantage is that you do not have to invest a lot of money up-front. You instead pay a fixed fee every month. This is great for owner-operators that do not have enough cash to make huge down payments. You can give low initial payments with step-up leases.

A step-up lease accepts small payments in the initial stage. Once your business starts making money, you can make higher payments. Many lessors offer a buyout option at the end of the lease if your business is doing well. If you’re worried that  there will be an unexpected balloon payment at the end of the term, worry not. The purchase price, payments, taxes and balloon payment are all spelled out on the first page of your commercial semi truck lease, no matter what state the contract is created.

Flexible Commitment

A shorter commitment is easier to manage for those who only need the semi trucks for occasional cargo. It also benefits owner-operators that may decide to change their career path. You can terminate the lease instead of selling a truck that has depreciated value. 

Afford High-Tech Trucks

Leases provide commercial semi truck financing for the newest semi trucks without increasing your payments. If you buy your semi truck, your budget will restrict you to a basic model. With leases, you can afford a semi truck with the latest technology to run your operations smoothly. 

Lesser Risks For Bad Creditors

Lessors are willing to go into business with bad creditors. They know that the risk involved is at most losing a month of payment and truck use. The lessee and lessor can discuss and decide on a fixed number that the lessee would pay. We found that a great resource for commercial semi truck financing for those with poor or limited personal and business credit is Amur Equipment Financing and Bryn Mawr Trust. Click the links to learn more about their  programs, rates and terms.

With banks, creditors fear the loan payments due to the high-interest rate. If they fail to make the payment, the owners run the risk of losing their trucks and the down payment. 

Tax Deductions

 You can also improve your cash flow with leases. Small business owners and truck drivers can access tax deductions that come with leased vehicles. This saves them tons of money that go into paying commercial vehicle tax when you own a semi truck. 

Attractive Balance Sheets

When you expand your business, you will go to lenders who first look at your balance sheets. With a semi truck purchase, they would see a loan for a depreciating asset. A leased vehicle will only be mentioned as a business expense. This looks appealing to lenders who want to invest in people that have shown proof of timely payments. 

Buying A Semi Truck

Lease agreements can be tricky with their wording. Leases do not require money up-front but can cost you more in the long-term. That is why many small business owners and owner-operators go with purchasing a semi truck with a loan. 

Let’s take a look at how purchasing a semi truck will benefit your long-term commercial semi truck financing.  

Assurance of Ownership

For business owners that prioritize long-term goals, ownership over a semi truck may be important.  As an owner, you get the freedom to make modifications and repairs to the semi truck. Lease agreements give that power to the lessor, or you will have to first ask for permission.

Cheaper Long – Term Investment 

Leases do not require immediate cash flow, but that does not mean they are cheaper. You have to keep paying for the truck’s services every time you use it. On the other hand, loan payments finish eventually and end the hassle of making payments. 

How Do You Decide Whether To Lease Or Buy A Semi Truck?

This decision is not made just by price point. You will need to ask yourselves questions regarding what goals you want to achieve with this truck. To make a well-informed decision, here are some things to consider.

  • For how long and how often will you use this vehicle?
  • How much money can you allocate for transportation?
  • What features are you looking for in a truck? Can you afford it with a purchase or lease?

Lease Vs. Buying – Final Thoughts

Both the commercial semi truck financing options have their risks and benefits. While leasing will increase your immediate revenue flow, purchasing a truck comes with the benefits of owning a big asset. The ultimate goal is to get a commercial truck that conserves money for building your business and credit. 

For both leasing and buying, remember to educate yourself properly. You should carefully read and examine the wording of the contracts. This way, you will be aware of what you get yourself into.

If you are not sure of what the agreement means, you can also consult with a lawyer. A specialist's advice is always considered good for a better investment. There are plenty of lawyers that specialize in commercial vehicle lease and purchases. The rest is up to you to decide which option will give your business a strategic advantage.

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