As a contractor there’s no doubt you need a trusty work vehicle to get you and your equipment to and from jobs. A pickup truck is the obvious choice in your line of work. But this represents a big investment for your small business, so you want to make sure you’re handling the process in the most advantageous way.
You’ve probably seen the ongoing debate about buying versus leasing a work truck. While only you know your business’s books, and therefore only you can decide which approach best suits your needs, there are some compelling reasons to consider leasing.
Here are four of them.
You Take Less of a Hit on Depreciation
While buying the truck does let you build equity over time, you also bear the full brunt of depreciation — which starts happening the second you drive the truck off the lot. One strategic advantage of leasing is that you only pay for the deprecation that occurs over the course of your contract. You will be able to know the amount of this depreciation and plan accordingly for it.
Furthermore, you can even select a pickup truck model that’s known to hold its residual value — or the amount it’s worth at the end of your contract — well. This will reduce the amount of depreciation for which you’re responsible.
You Preserve More Capital
Cash flow is king when you’re running a small business, so either buying a vehicle in cash or coming up with a sizable down payment can be risky.
Leases help contractors preserve capital in a few ways: by offering lower monthly payments than buying and by requiring less of an up-front investment to get the keys. As the Journal of Accountancy writes, leasing tends to save money compared to buying.
Say your electrical contracting business wants to add a new Ram 1500 or 2500 to its small fleet. Comparing Dodge Ram leases versus loan deals will help you get a better idea of how much each option could cost you per month and overall — as well as the terms and conditions you would encounter for each type of financing.
Your Truck (or Fleet) Stays Newer
Never want to worry about driving around an old banger of a truck? After all, your vehicle represents your business to customers — and affects your day-to-day functioning, too. As Contractor Magazine notes, the ability to lease a truck for a few years and return it “allows you to keep your fleet refreshed by bringing in new equipment.”
Another advantage of constantly driving new or near-new trucks is routine maintenance is often covered under the terms of the lease — and your chances of malfunction are lower as the pickup rolled off the assembly line more recently. Not having to worry as much about facing inconvenient and expensive repairs probably takes a load off your mind.
Not to mention, newer trucks tend to have newer safety and infotainment features that can make your drivers better in myriad ways compared to older models.
Leasing a Work Vehicle Has Tax Advantages
Last, but certainly not least important, leasing brings with it some key tax advantages. For instance, you can deduct driving costs from the company truck — assuming half the mileage or more is necessary for business purposes. Any miles you put on your truck accomplishing job-related tasks are often deductible come tax season.
These reasons contractors should lease a work truck — leaving more cash flow free, absorbing less depreciation, keeping your fleet up to date and deducting some driving costs from taxes — make a compelling case for why you should at least consider leasing rather than buying.
