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With a lease, a trucking firm is given the right to use a trailer, forklift or other equipment for a set period of time. When the lease ends, the business simply returns the equipment to the leasing company which owns the asset. Lease contracts often include a provision to purchase the equipment at lease-end at a pre-determined price.
Of course, the purchase at lease-end is optional. Many trucking business simply enter into a new lease on another piece of equipment to maintain the benefits offered by leasing.
For many trucking businesses, cash flow is a key consideration. When this is the case, leasing is often an attractive option. With a lease, you are not paying the entire cost of the equipment, you are only paying to use the equipment for a set period of time. As a result, payments are typically lower - often substantially lower. Truckers and forms building their businesses may use the cash freed up by an equipment lease for other important purposes.
Those that buy equipment enjoy the benefits and assume the risks associated with ownership. Due to the fact that the entire asset is being purchased, loan payments are usually significantly higher.
Firms showing significant profits on their balance sheets may choose to purchase to take advantage of the Section 179 tax deduction. This provision in the tax code allows businesses to immediately deduct all or part of the cost in the purchase year. However, although the Section 179 deduction is often attractive, it does not benefit cash flow immediately.
Consult with a licensed tax professional to determine whether a purchase or a lease is best in your case.
The experienced staff at Liberty Leasing stands ready to answer your lease vs. buy questions. For knowledgeable and friendly assistance, please contact us.
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