Reading Time: 3 minutesBuy or Lease the Right Equipment

Buy or Lease?

There are many choices to make when owning a trucking company. One of the more substantial ones involves the equipment you’ll use to get what needs to be delivered where it needs to go. Ultimately, you’ll likely be deciding between whether to buy or lease the right equipment your trucking company needs, especially when it comes to vehicles. Below, we focus on the buy vs. lease debate and go over some important factors to consider.

Fuel Economy

With fuel costs on the rise, fuel efficiency is a top concern for many people in the trucking industry today. Many shippers today are also more environmentally conscious, so they often prefer trucking companies that minimize their carbon footprint. Plus, there are government regulations with regards to emissions to keep in mind. A new truck is typically going to be more fuel-efficient than a leased one that has been in service for a while.

Newer Comforts and Technologies

Whether you’re an owner-operator or you have other people working for you, it’s understandable to want to have access to newer comforts and technologies. If this is a top priority for you, buying new equipment will likely give you what you want. But if you’re not completely focused on bells and whistles that aren’t really necessary, leasing can be the way to go.

Buying vs. Leasing: Costs

According to the Truckers Report, $1.38 is the average per mile operating cost in the current trucking industry. Lease payments for a semi-truck usually run between $1,000 and $2,500 each month. This averages between $33 and $83 per day. If you buy a truck, the average purchase price ranges from $30,000 to $200,000 or more, depending on the size you need and other factors. Granted, this is a one-time expense, but it can be a pretty hefty one, especially for an owner-operator just starting out.

According to the American Transportation Research Institute (ATRI), it costs about $182,000 to keep a single truck on the road each year. You would be responsible for all costs with a truck you buy, so this averages to about $498 per day. With a leased vehicle, you would be responsible for the expenses stipulated in the lease agreement. As you can see, the costs are starting to add up…

Possible Incentives to Buy New

Some states provide incentives for trucking companies to update older equipment – trucks, usually – with newer equipment with updated emission control systems. In some cases, these incentives could be as much as $25,000. This doesn’t necessarily mean you have to buy new to earn these incentives. If, for instance, you’re able to find newer equipment to lease, you may still be eligible for the incentives.

Buy or Lease: Pros and Cons

Finally, let’s take a look at the pros and cons of buying and leasing equipment to give you a better idea of what to consider.

Buying

Pros

  • Full ownership of the equipment
  • Tax incentives – e.g., depreciation deductions, new business equipment deductions, etc.
  • The ability to lease your own equipment to other trucking companies if you wish to at some point

Cons

  • Higher upfront costs
  • Possibility of having to opt for equipment that’s not so new to keep costs in check
  • Full responsibility for any and all issues involving the equipment

Leasing

Pros

  • Lower initial costs
  • Lease payments are often tax-deductible
  • Lease terms tend to be flexible
  • Easier to upgrade your equipment when it’s time to renew your lease

Cons

  • Higher initial costs
  • Lack of ownership of the equipment
  • Possible early lease termination fees
  • Possibility of being responsible for lease payments even if you end up no longer using the equipment

Lastly, if you’re a truck driver getting ready to become an owner-operator, seek input from other drivers that did the same thing about purchasing needs and options. They will likely be more than happy to give you equipment buying and leasing advice based on their own personal experiences.

Be sure to check out our previous posts in this 7 Step Guide to Starting Your Trucking Company. The previous post covers how to obtain the necessary licences and permits.