Lease vs Purchase

Lease vs Purchase a Semi-Tractor

To Lease or Purchase?” With so many choices and Companies with so many Agendas, typically, their best interest first, it is confusing to know exactly the best route to go.

Lease or Purchase a semi-truck a Tutorial:

I put this page together from an Article I found some time ago to help you sort out some of the Facts and at least begin to understand the basics, if you are new and just beginning to do your own Research into becoming a business owner in the Trucking Industry, you should spend a minute here…But, please do take the time to read this first. Thanks Buck Williams, Recruiter

Your first Consideration putting First things First

credit scoreDo you have good credit, a credit score of around 600 or Higher?

Do you have around $5,000 to $6,000 down payment as a First-time buyer??

Most experienced over-the-road Truck Drivers and Owner Operators I have talk with during the past 25 years are not aware that to purchase a semi-tractor, when you go to the bank with good credit and a suitable cash down payment, that they are considered “First-time Buyers” regardless of their trucking experience.

Unless you have successfully owned and operated a semi-truck for the past two years, preferably longer, and made a typical profit as an owner operator, you will NOT qualify for a loan from a traditional Bank. You are not buying a truck, you are asking to finance a business. And, to finance a business, you must have a successful track record as a business owner to in order to get financed, especially in the Trucking business.

Where does that leave me?? Well, if you are the one with the good credit score and the nice down payment, there are numerous Used Semi-Truck Dealerships that may finance you, however you seriously need to do your homework because I have seen so many sincere folk over the years get really burned at many unscrupulous Dealerships.

Why not learn the ropes from the Pros at at one of the trucking industries carrier-sponsored truck driving schools, get your hands on a late model Semi with no money down, no worries about your credit (no credit check) and make sure owning a truck is right for you. Or, maybe you decide to go back to being a company driver, you can easily make that transition.

Okay let’s look at Lease vs Purchase:

Lease term vs Loan term: Semi Truck Lease Purchases are typically shorter duration (30 month- 42 months usual maximum) than standard Class-8 tractor financing (which can run up to 60 months) therefore the payments on a semi truck lease will tend to be somewhat higher.

Think for a minute, what is the value (or equity) of a tractor you purchased used, ran hard for 48+ months and then traded? In some cases a lease might be better.

Enjoy the generous tax benefits of being an independent contractor with (little or) no money down lease tractor purchase and no necessary credit history established (in most cases).

If you’re leasing a truck and experiencing trouble with it, your Carrier that you are leasing from will work with you toward a solution. In contrast, if you’re buying the truck, it’s all your responsibility.

If you’re leasing a truck rather than buying it and you have an accident, your Carrier can usually work with you to finance missed payments while supplying another truck to lease until yours is repaired.

The base cost of leasing has not changed during the last three years. The cost for buying a new truck goes up about 4% every year.

If you’re leasing a truck and have warranty problems, simply let your Carrier know and they’ll handle the problems for you. In contrast, if you’re buying a truck and have warranty problems, you are on your own.

If you’re leasing a truck and you get hurt and are unable to work, you can contact your Carrier immediately and arrange for them to terminate your lease and take possession of the truck. This protects you from making any more payments without negatively affecting your credit. If you’re buying a truck and become injured, your payments will still continue to be due each month even if you are unable to work.

Some negative considerations: Some Leases require excess-mileage charges, maintenance, performance, and tire escrow accounts and other possible expenses that can be quite expensive as weekly deductions. All the unused portions of all your escrows should come back to you at the end of your lease term if you satisfactorily complete the lease without incidents, accidents, and major claims.

This can add up to around $10,000 in 36 months as what is commonly called a “lease completion bonus.” So, if you perform well during the lease, this can take the sting out of the deductions which come back to you and end up being kind of a “forced savings account” that you might not otherwise have had. (Not all Carriers offer this lease-completion bonus)

Lease vs Purchase – Semi tractor

The Carriers have to deduct these monies (for maintenance, tire replacement, etc) from the drivers weekly Settlements because, guess why, most drivers are not going to set these accounts up and put the money back for their own operating expenses.

Most leases that we have seen require that you run about 3,000+ miles per week to really make them work. Too much time off between trips can put you in the hole because the truck has a weekly, actually daily, fixed-cost that requires consistent revenue to balance these fixed expenses. Once you calculate these costs you can plan your trips and home time

to your own financial advantage and not go into the “red.”

The bottom-line is you don’t have to buy a truck to be your own boss. There are many good truck leasing programs out there to help you establish or rebuild your credit history and to allow you to operate a tractor and become an owner operator that you might not otherwise be able to afford or qualify for right now.

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