Owner Operator at Old Dominion

OK . I paid cash for my new truck. Still haven't heard the details on those tax advantages of leasing over buying. I checked with Schneider about buying a new truck through them ( was considering leasing on there ). They said it would be a lease. I couldn't just buy it outright . I added up the payments and buyout and down payment. The total amount equaled $ 170, 000. Seemed expensive to me. It did include a TK Tri pac.

 

It isn't necessarily a tax advantage but it can be depending on how you have your business structured.

The basic differences is that when you purchase a truck you cannot right off the actual cost of the truck as you incur it. You have to depreciate the truck over 5 years even if you paid cash for it in a single year.

With a lease you can right off 100% of your payments as you make them, there is no depreciation of the asset.

Lots of business other then trucking companies choose to lease equipment just for this reason. If you own it you must depreciate it as an asset, if you lease it the cost can be written off the same year it was incurred.


Now this is not to say that most if not of the company sponsored lease programs are bad idea but that does not mean that leasing on its own is a bad idea. You just do not want to limit the loads you can get to the same company that holds your lease.

 

The dollar amounts for lease payments and the amount for depreciation would probably be similar annually. What I hear people emphasize with a lease is you can write off 100 percent of lease costs/payments. But you can write off all truck expenses. Also , from what I have seen, leases are more expensive than buying. And often times there is a big balloon payment at the end of the lease term if you want to own it. Also, with a lease, you seem to be locked in for years of payments .
I was leased to a company that used Ryder lease trucks and trailers. The company had one terminal ( in NC ). They ran to CA and back. This company didn't have or need their own shops and if you needed road service you called Ryder .Using lease trucks was convenient and made sense for them. They could focus their energy on other aspects of running their company and let Ryder handle the trucks. And they could get a replacement truck when one was in the shop. So leasing had many advantages for them. For me, leasing doesn't seem like a good deal. It seems more expensive than buying.

 

Thank you Ubu. My point exactly.
In my case, leasing is a form of purchase, with no one but the finance company holding the title. I have never even been asked where the truck will be, just like an outright purchase, as it's non of their business. I also choose my own balloon payment, from a single dollar to whatever I choose. Interest rates are the same regardless, my last one through Wells Fargo was at 5.25%. It would have cost the exact same whether lease or purchase, as the interest was figured on the amount of the truck and nothing else.
As far as advantages,here is an example for you all.
Lets assume $100k purchase price, bought in January.
Lease payments of $2000 per month.
Lease payments claimed for that year would be ($2k x 12) $24,000, and would be for every year until paid off.
Purchase depreciation (assuming normal 20% depreciation) would be a $20,000 for that year, then 20% of the remaining balance for the year after, and so on.
So in that scenario, the lease wins.
Now, buy the same truck in December, and its a different story.
Lease payments claimed would be $2,000 for the year (1 payment for the year)
Purchase depreciation would still be $20,000.
Get it?
Thus why I said I take into account WHEN I buy the truck, and so on.
I am out of this one now, as some cant get it through their head that you can't lease a truck from anyone except a trucking company, which is BS. Last time I looked, Wells Fargo Equipment Finance didn't haul freight....

Martin

 

Dont do it

 

Thanks for this information! How much deposit or down payment is required on this $100k example? I'm paying considerably more than $2,000/mo in a company lease due to the, "NO CREDIT CHECK REQUIRED!" 15% interest rate. Yeah, I know, but this is a true walk away lease and I wanted to test the O/O waters. I have good credit and figure that I will save close to $200/wk if I can get an interest rate under 6%.

 

Sharpp,
Those were totally made up numbers for easy reckoning etc. The deposit can be whatever it needs to be, to lock in a good rate. There is absolutely no reason these days why that 5.25% I got in '05 shouldn't be lower now. I am looking into a new(er) truck myself at the moment, and haven't shopped for interest rates yet.
Another way to get a good rate is easy, pay a good price for the truck! All they want to know is, can they reposses a truck and get their money out of it. So if you can get a $100k truck for $90k, it's the same situation in their eyes.

Martin

 

I talked to one down in GA at the little fuel stop exit 61 off 85 about a year and a half ago. He said it was ok and he gets home about everyday but in order to make good money you have to hustle and get the right loads. From talking to him it wouldnt be something to jump in with a $2000 truck note you have to realize there are other expenses. And hauling containers for OD is no different than any other container company. Waiting on container, container not where it is suppose to be, getting in and out of railyards/ports. I did a power only load it was suppose to pay $700 go 56 miles to charlotte pick up and 60 miles back to thomasville. Went to charlotte sit on rail yard almost 3 hours to find out the containes was still in NJ. So I only got $250 for truck not used but good thing it was on a friday and I hadnt plan on doing anything I thought this was a quick $700 that would have taken only about 3 hours

 

well can anyone give any more info before I call them thinking of jumping ship and making the move .