Purchasing a truck is a major decision that most people in business have to face sooner or later. When it comes to having to decide on whether to buy a new truck for your business or if it would be better to rent one, the biggest factor or question you have to answer is, will buying a truck be worthwhile, is it a good investment that will bring in more business or would it be just another expense that drags down your bottom line.
Will the truck work for you or will you be working for the truck?
Sure, it’s nice to have a brand new shiny top of the line truck to drive and just look at. The old silly old idea that if you look successful, then you will be, still sucks many people in The reality is that in business you need every dollar working for you and all decisions need to be based on value for money spent.
You need to consider whether the truck will be working and earning so it becomes an asset and produce a net income or are you buying it for prestige and because you want it?
If you make, one or two deliveries a day, then it is hard to justify spending $40,000 to $60,000 plus on a truck. If it runs all day and is delivering your stuff everywhere, then yes, it is working for you and is probably justifiable.
There are pros and cons to every business decision you will ever make and if you make them on emotive issues instead of factual realities, then you are like many businesses likely to fail, you may get stuck with a truck you cannot afford and do not need.
Here are some of the pros and cons of leasing, renting or owning a truck:
- What is the purpose of having a new truck?
- If you are doing Government contracts they demand that your tuck and other equipment is less than two years old and is in good running condition. If it’s not always working, earning then it’s losing money for you.
- Will you be able to have it working all day, every day for two years? If not, then how will it pay for its self? How will you replace it after two years?
- Will you use it for personal use and if you do how much?
- Do you really need it? Often the money could be better spent on stock, manufacturing plant or production.
- Does it do a specialty job or can it be used as an all-rounder? For example, a low-loader that delivers your bulldozer to sites.
- Will it be used once a week or several times a day?
- If you only use it occasionally then renting is a great option as it saves on capital expenses plus you will probably be able to make a deal with the truck rental company and get discount for frequent use.
- If you have a medium amount of use for the vehicle then leasing becomes an attractive option with the associated tax benefits and not having your assets and capital tied up in loans.
- Not having to pay interest and other finance charges as well as the principle vehicle cost is very attractive
- No maintenance issues or repair bills and being able to pick a vehicle that you would possibly not have been able to afford if you were buying it
- What you need to know is how will buying affect your cash flow and will renting be substantially different, cost more or less. Running a business is all about getting the best return for your dollars spent
- What is the long term goal?
- Do you want to keep the vehicle for the long term or will you want to update it regularly?
- Often it is much more cost effective to lease or rent a truck, especially when starting out in business. Once you have some historical business data you can make an informed decision
It all comes down to value for money spent. If you’re getting value, making a good return on the investment of owning the truck, then that is the best option. But if you don’t have enough work, then renting it when needed is a smart money saving business strategy.