QUESTION: I’m starting my own hot shot business and I wanted to know which is better leasing or buying a truck. all I need is a 1 ton truck.from what i been told its better to lease so if the truck breaks down I can just call the leasing company out to fix it and get my driver going again. But i really want my own truck,and besides I can just write it off and get most of what i paid for it back. So which is better to do?
ANSWER: Justin, there is no right or wrong or one way fits all on this issue.
First understand that there are different types of leases. The most expensive is the full service lease which is convenient when you have only a few trucks. You don’t have to worry about stocking parts of hiring mechanics. As the fleet gets larger however you can often do your own routine maintenance cheaper and only go to an outside shop for major repairs or overhauls. Another form of lease known as a finance lease or bank lease is actually just a way to finance the truck; you take care of all maintenance but the entire lease payment is deductible and at the end of the term you can buy the vehicle for it’s residual value. Typical is a 5 year lease with a 20% residual. With conventional financing you can take depreciation and the interest is deductible. You will pay more per month but at the end of the finance term you own the truck. The cheapest way to acquire a truck is cash outright, but that option is rarely used because there are usually other demands in a business for available cash, like payroll and taxes.
To decide what’s best for your situation you need to get quotes for all variations and then do the comparison with your accountant to see what makes the most sense for your situation.
Beast of luck, Jim.
———- FOLLOW-UP ———-
QUESTION: Thanks alot man that helps i think im just going to go ahead and buy the truck cash. But anther question I have is what all paperwork will i need? I have ferdal tax ID # biz DBA what else do i need and how do I go about getting it?
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