THE ULTIMATE GUIDE TO COMMERCIAL TRUCK LEASING
According to industry reports, truck leasing has witnessed exponential growth over the years. In 2022 alone, there were over 1.8 million truck leases, which shows that more businesses are buying into this financing option. The benefits are proof of this preference.
Commercial truck leasing is a viable alternative to purchasing as it offers reduced upfront costs and effective cost management in comparison.
But there’s much more to understand about this option. In this article, we’ll unpack the essentials to help you make informed decisions for your business.
WHAT IS COMMERCIAL TRUCK LEASING?
New and experienced truckers have one thing in common: the need for vehicles to run their daily operations. There are cases when purchasing does not seem feasible due to the financial commitment. This is where leasing shines as a practical alternative option to provide truckers access to the vehicles they need to keep business moving.
Commercial truck leasing is a contract arrangement with a dealer to use a truck for a period while making regular installment payments. It can be an ideal option if you seeking the flexibility to upgrade your fleet without making the huge capital investment that comes with purchasing. Apart from low financial commitment, there are other benefits such as predictable monthly payments, and the ability to upgrade vehicles to newer models. However, it also comes with considerations like mileage limitations and the absence of equity in the vehicle.
BENEFITS OF LEASING A COMMERCIAL TRUCK
FLEXIBLE CREDIT REQUIREMENTS
Compared to purchasing, the credit score requirement for leasing is more lenient. Lenders are more likely to consider other factors such as time in business and stream of income. Other lenders like Inspired Funding offer solutions without minimum credit score requirements. So if you have a less-than-perfect credit score, this is an option you want to explore.
LOWER UPFRONT COST
The initial investment needed for minimal, as you will not be making a large down payment. This can take the financial strain off your business allowing you easy access to a truck without impacting your pocket.
IMPROVED CASH FLOW
Monthly payments are often predictable and fixed, making it easy for you to plan and budget your revenue with ease. Together with the lower upfront cost, you can have better cash flow management that can be wired to other business expenses like fleet expansion, and operation costs among others.
ACCESS TO NEWER TRUCK MODELS
Truck brands tend to release newer models with the latest technology and safety features. For a purchased vehicle, switching to a new model with require you to either buy a new truck or dispose of the current one. On the other hand, you can exchange your leased vehicle for a better model at the end of the term.
AVOIDANCE OF DEPRECIATION RISK
You’re not financially responsible for the value depreciation of your vehicle since you’re not taking full ownership. The lessor bears the risk of any decline in the market value.
LEASE-TO-OWN
Exploring the lease-to-own program guarantees the option to purchase the truck at the end of the lease term, facilitating ownership. This arrangement can enable you to manage cash flow effectively without the need for a substantial upfront investment.
DRAWBACKS OF COMMERCIAL TRUCK LEASING
Just as leasing holds many benefits that may align with your interest, it is also important to consider its potential drawbacks.
LACK OF OWNERSHIP AND EQUITY
While you get to use the vehicle for an extended period, this does not translate to full ownership after the payment period. Because of this, your monthly financial commitment will not build equity.
MILEAGE AND USAGE RESTRICTIONS
Trucks can come with some restrictions such as mileage and the overall usage of the vehicle. When considered, these restrictions can have a negative impact on your business operations. Plus, exceeding this restriction can result in penalties fees, and additional costs.
MAINTENANCE RESPONSIBILITIES
Depending on the terms, you may still be responsible for maintenance and repairs, which can add to your expenses.
INSURANCE C OSTS
Leasing companies may require higher insurance coverage levels, leading to increased insurance premiums.
HIDDEN COSTS
It is not uncommon to have a deal with lessors with ambiguous and unclear terms of contracts. In situations like this, contracts can be laced with hidden fees such as administrative fees and unfair termination of the agreements. To avoid this, ensure you do your research and deal with only trusted lessors. Also, review agreements before you sign.
LEASING VS. PURCHASING
In the world of commercial truck financing, leasing, and purchasing are usually two options businesses consider. Both fulfill different purposes and the decision on the one to choose is based on various factors and considerations. We have broken down the common differences between these two options in the table below to help understand better.
| FACTORS | PURCHASING | LEASING |
| Ownership | Full ownership upon completion of payment. | No ownership. The company retains ownership after the agreed-upon period. |
| Upfronts costs | Requires initial down payment. | Lower upfront cost, usually the first month’s payment. |
| Maintenance | Owner is responsible for all maintenance and repair costs. | Agreements often include maintenance services. |
| Flexibility | Less flexibility, as changing the vehicle requires first disposing of the initial one | Higher flexibility to upgrade to new models at the expiration payment term. |
| Tax benefits | Interest expenses may be tax-deductible. | Payments are deducted as business expenses. |
| Mileage restrictions | No mileage restrictions. | Includes mileage limits. |
| Customization | Full freedom to modify or customize the vehicle as needed. | Limited or no ability to customize. |
STEPS TO LEASE A COMMERCIAL TRUCK
If you think this is a good deal for you, then it is essential that you understand the process that guarantees the best deals. We have narrowed them into the following for you:
RESEARCH LEASING OPTIONS AND COMPANIES
Start by researching available options such. Then proceed to source reputable companies that offer commercial trucks suitable for your business needs. Ensure you do a comprehensive review–ask around, and check reviews online.
COMPARE TERMS
Different companies will have different terms and conditions. Scrutinize these details and check terms on mileage restriction, maintenance liabilities, credit requirements, and duration.
Also, ask about hidden fees and potential penalties. Doing this will help you assess the one that is more aligned with your business goals and help you make more informed decisions.
PREPARE NECESSARY DOCUMENTATION
Just like other types of commercial truck financing, you will need to tender necessary documentation like your personal information, business record, credit history, bank statements, tax returns, and proof of insurance.
FINALIZE THE AGREEMENT
After your documents and application have been reviewed and approved, it’s time to finalize the agreement. Have a legal professional review the agreement to ensure clarity. Once satisfied with the terms, proceed to sign.
TAKE DELIVERY OF THE VEHICLE
The final stage is to have your vehicle delivered to you. Upon delivery, conduct a thorough inspection to confirm that it meets the specifications and is in good condition.
GET THE BEST COMMERCIAL TRUCK LEASING DEALS WITH INSPIRED FUNDING
Whether you choose to lease a commercial truck or purchase it, there are a couple of factors that you must consider. One of these is your financing partner. You want to work with a transparent partner who gives you the support you need and sticks with you from the beginning of the process to the end. Additionally, take the time to carefully review the terms and conditions to ensure they align with your specific needs and circumstances.
Inspired Funding has helped many businesses to finance their trucks. we also guarantee that you enjoy some benefits when you opt for commercial truck leasing such as no credit score requirement, no hidden charges, and access to constant support. Start your journey today and take the first step to hassle-free commercial truck leasing.
