By: Viraj Shah

One very large cost for some businesses is the outlay for equipment. When heavy transportation equipment is involved, that cost can be considerable. Businesses that purchase heavy transportation equipment outright may be better served in some cases to lease the heavy equipment, such as a tanker truck, a semi-truck and trailer, or an earth mover.

Outlays in the First Year and Beyond

If you lease heavy transportation equipment, you usually do not have a down payment required to start the lease period. If you are purchasing heavy transportation equipment, the lender will likely require a deposit of 20 percent of the value of the vehicle. The vehicle will be the collateral for the loan.

Also, the tax advantages of leasing are immediate. Business interests can usually write off the monthly lease payments in full as a part of the tax code’s Section 179. Section 179 can be finicky, though, if you are purchasing a new or used heavy transportation vehicle. For one thing, there is a fixed amount you can write off each tax year with a purchase of new or used capital equipment. If you exceed that amount, you will not be able to write off the entire purchase in the tax year you made the acquisition. Also, the bonus depreciation tax deduction ends at the end of the 2026 tax year.

There are also the costs of maintenance, repair, and upgrades. If you are leasing equipment, the costs of maintenance and repairs are usually paid by the company that leased you the heavy transportation equipment. Also, leased equipment is newer and maintained at a high standard. There is no loss for depreciation as you would experience with an outright purchase of heavy transportation equipment.

Leasing heavy transportation equipment helps enterprises keep more cash liquid for other changes in the business environment. In today’s business environment, keeping a certain degree of liquidity is the safest bet of all.

The Need for State-of-the-Art Equipment

If you need to stay with the most state-of-the-art equipment, you will not likely want to purchase heavy transportation equipment outright. The time and costs involved in having to sell used transportation equipment are prohibitive. In order to stay with the most technologically advanced equipment, you would be in a frequent cycle of purchasing and selling equipment. Leasing allows you to operate the most modern equipment on the market every year without the hassle.

Also, what if you need an upgrade or alteration? A good heavy transportation equipment leasing company will accommodate such alterations in order to keep repeat customers.

Flexible Terms

If you have not built up sufficient credit as a business owner, you may be forced to either take out a personal loan or forgo the equipment purchase entirely. It is usually best to avoid taking out personal loans to fund your business whenever possible. Any economic downturn that causes you to miss payments can impact your personal credit score. Leasing often comes with more flexible terms, such as the possibility of being able to make payments for a longer lease period to lower monthly costs. Also, the creditworthiness of your business does not need to be as high to lease equipment.

Nimble enterprises who want to stay in state-of-the-art transportation equipment and write off the costs on the taxes each month look to leasing vehicles in order to keep on top of the economy’s blips and crashes.

Published by: Khy Talara