The Work Truck Dilemma: Leasing vs. Buying

As a plumbing contractor business owner, you are aware that work trucks are one of the largest and most expensive investments tied to service companies. When investing in work trucks, you need to decide if you want to buy or lease work trucks and what option suits your plumbing company the best.  

There is not a one-size-fits-all answer when it comes to leasing vs. buying work trucks because plumbing companies are all unique. Some business owners will find that leasing provides them with the flexibility and low upfront costs needed, while others might find that owning work trucks gives them more control and is more cost-effective in the long run. But it’s not that easy a decision to make—there is so much to consider when you are in the market for new work trucks.  

Consider All the Financial Factors

Before looking into the benefits of leasing vs. buying, you need to dive into your finances to decide what is best for your business. For example, leasing frees up capital for other business needs or investments, enabling cash flow management. However, if you are looking to add equity to your business, you may prefer to buy the work truck. If you are buying a vehicle, the cost is an investment instead of an expense. But vehicles always depreciate. You must decide if buying a work truck is really a good investment for your business. 

You also need to figure out the operating, maintenance, fuel and insurance costs when leasing or buying a work truck. When leasing you usually do not have to pay for unexpected maintenance, only oil changes and tire rotations. When buying you are responsible for all maintenance.

There may be tax incentives when leasing work trucks too. According to the article Leasing A Vehicle: Why Service Companies Should Lease Instead Of Buy, you can  write off part of the lease financing costs on your taxes. Plus, you may be able to write off a portion of the vehicle's depreciation.

You also need to consider the wear and tear of work trucks. At the end of the lease, you may want to turn the work truck in and lease a brand-new vehicle instead of purchasing the leased work truck. When turning in a lease you may need to pay for any damages that are not considered normal wear and tear based on your specific lease contract.

Leasing EVs

Keep in mind that leasing is a great way to test out vehicles with new technology, such as electric vehicles (EVs). According to the article What makes sense to you? The decision to lease vs. buy trucks, given EV technology and the yet-to-be-determined market resale values of these type of trucks, leasing EVs can help you test the integration of these new vehicles with less financial risk. Plus, there is uncertainty about how the used EV truck market will evolve in the future. Therefore, by leasing EV trucks, you can mitigate risks with resale exposure.

Buying vs. Leasing Work Trucks

Once you take stock of all financial considerations, you can then decide if buying or leasing is best for your business. Below are a few items to consider.

Buying may be best if you:

·       Have cash to invest in new work trucks.

·       Plan to operate the trucks for longer than five to seven years.

·       Have the experienced staff to properly maintain and service vehicles.

The benefits of buying are:

·       You have complete control over the work truck—there are no mileage restrictions or wear-and-tear penalties.

·       The total cost of ownership may be lower than leasing.

·       You can sell the truck at any time once you own it outright.

·       The truck counts as an asset for your business.

Leasing may be best if you:

·       Do not want to invest a lot of cash in work trucks because leasing usually has a lower upfront cost.

·       Want to free up capital for other business investments.

·       Want to reduce unexpected vehicle maintenance costs.

·       Want the flexibility to update your trucks every three to five years with the latest models.

The benefits of leasing are:

·       You can easily upgrade or downsize your fleet based on changing business needs.

·       If you value having the latest models with the most advanced features and most fuel-efficient vehicles.

·       You preserve your cash flow.

Resources 

The good news is you don’t have to lease all of your work trucks or buy all of them—you can do a mix. For example, you may opt to buy internal combustion engine work trucks and lease an electric vehicle. Again, it all depends on what you decide is best for your business. Ultimately you need to do your homework before you purchase or lease new work trucks. By doing so, you will be able to make the best decision for your plumbing business.

Here are some online resources for you to learn more about leasing vs. buying work trucks:

·       Should Contractors Purchase or Lease Trucks for Business? [Cost Example]

https://www.merchantsfleet.com/articles/contractor-lease-work-truck-business/

·       6 Reasons Why Contractors Should Lease Work Trucks

https://www.ewaldfleetsolutions.com/blog/worktrucklease/

·       Purchasing or Leasing the Right Truck

https://www.contractorsassociation.org/purchasing-leasing-contractor-truck/

·       Navigating the Road: Lease vs. Own for HVAC Fleet Vehicles

https://hvac-blog.acca.org/navigating-the-road-lease-vs-own-for-hvac-fleet-vehicles/

·       What makes sense to you? The decision to lease vs. buy trucks

https://www.ccjdigital.com/business/growth-strategies/article/15637329/the-decision-to-lease-or-buy-trucks

Candace Roulo is a graduate of Michigan State University’s College of Communication Arts & Sciences. She has 15 years of industry experience in the media and construction industries. She covers a variety of mechanical contracting topics, from sustainable construction practices and policy issues affecting contractors to continuing education for industry professionals and the best business practices that contractors can implement to run successful businesses.