The Benefits of Leasing vs. Buying

The transportation of your manufactured goods is a cost of doing business. Often, that cost can be a direct liability depending on your company’s decision to purchase or lease rolling stock. Before you make this decision, consider the following points as they relate to your business.

If your company has already acquired its own fleet of trucks, you’ve seen first hand the large amount of working capital that is tied up in such an acquisition. Some companies might consider this to be a justifiable expense. On the other hand, this money might be put to work more productively in investments or programs directly related to the growth and profit of your business. Leasing a fleet rather than purchasing also leaves you greater borrowing capacity on your organization’s lines of credit.

Moreover, running and managing a fleet of trucks requires specialized transportation skills. The purchase and maintenance of company owned equipment often creates a drain of time, talent and financial resources. Consider whether or not your company can afford to dedicate the transportation personnel required to effectively run and maintain a fleet.

Tax changes can also impact your decision whether to lease or buy. While a lease can be fully tax deductible, the depreciation of your purchased vehicles can actually increase your exposure to the Alternative Minimum Tax (AMT) taxable income. The repeal of the Investment Tax Credit (ITC) may further erode the tax benefits once associated with ownership. In addition, leasing provides a fixed monthly transportation expense, which presents budgeting and bookkeeping advantages.

As a first step in weighing the pros and cons, please complete the online Lease vs. Buy worksheet. It will provide you with a quick overview of the costs associated with owning your own transportation equipment. We hope this important exercise helps you make an informed, objective financial decision on leasing versus buying your own rolling stock.