Truck Financing
How To Help Your Business
Whether small, medium or large scale, many businesses require mobility, especially for the movement of goods. Due to the size of goods to be transported, a truck is usually the best option.
Also, the trucking business is a hugely successful venture, a venture that provides services that are deemed a necessity. Owning a truck certainly comes with drawbacks. Financing is the major constraint to owning a truck, especially as a small business owner. To find a way around this, many businesses that acquire trucks do so using credit facilities. Credit facilities help these business owners get access to trucks quickly, invariably helping to sort out a massive chunk of startup capital.
Truck Loan or Truck Lease
Before you get a credit facility for that truck, you must first consider whether you should go for a lease or a loan. There are significant differences between both, and you would need a lot of introspection to come up with the best decision that suits you the most. Before we discuss how to make the best decision for yourself, you should first understand the differences between each option.
A lease is a little like a rental; you are to pay monthly charges for you to continue to use the truck with certain limitations like mileage and use case scenarios in order to keep the truck at optimal performance. It should be noted that this truck does not belong to you, and you would have to return upon the end of the contract tenure.
As for a loan, you’re required to make a down payment of a certain percentage, but you’ll also have to pay a certain amount monthly. With a loan, the vehicle is yours, and you can use it as you deem fit, and you can even complete the payment before the end of the payment plan duration.
Now that you’re about to make that decision, there are certain factors you need to consider before you do. These are the use case scenario, the cost of each, taxes, and long-term goals. Let’s dive into each.
Use case scenario:
Whether you should go for a truck lease or a loan depends on how you want to use it. If you intend to use the truck for very tasking jobs, then maybe a lease is not the best option for you because the lease company may have specific use restrictions and mileage restrictions, all of which may affect your work rate. In this scenario, a loan is your best bet as the vehicle belongs to you, and whatever you do to it or with it is entirely your business, so long as you pay what is required of you, monthly or as stipulated by the contract. Also, if you intend to use the vehicle for a short period of time, a lease may be the best option, and on the flip side, a loan should come in handy.
Costs:
For a loan, you’ll be required to pay a certain percentage of the total amount upfront, which may be huge as well as substantial monthly payments. This may not be the option for a small business that is just starting with small capital. This is where a lease saves the day because you will not be paying a huge amount upfront, and your monthly payments are lower for a lease. However, this may be expensive in the long run, which is why we suggested a lease earlier for short-term use and a loan for long-term use. Also, the moment you pay off the loan, your monthly payments end; thus, you can begin to make more profits quicker than while still making monthly repayments.
Taxes:
If you go for a lease, you need not be bothered about taxes as they are a part of your monthly lease payment. But if you go for a loan, the asset is yours, and thus, you would be taxed. Payment of these taxes would be outside of your monthly loan repayment.
Long-term goal:
With a lease, you would have to return the vehicle in good condition once your contract expires. In contrast, a loan affords you the opportunity to own the asset and sell it off to buy a newer one after your payment.
Why you should opt for truck financing
There are so many advantages that come with getting a little boost for your business. The fact that you’re considering credit facilities implies that you cannot cover the payment on your own, which already puts you at a disadvantage. Getting a credit facility helps you float your business faster and thus gives you less time to worry about truck financing and more time to think about other essential things.
The amount you would spend on getting a truck without any form of credit could be redirected towards other areas of the business that need financing. Thus, giving you added flexibility in your own funds.
Further, getting truck finance requires a minimal down payment. This is a significant advantage when comparing truck finance with regular loans. You’re not required to pay any down payment for a lease as you are not acquiring the asset. And in the case of a truck loan, only a sizeable amount will be required due to the nature of the agreement. The fact that collateral is not a requirement is another huge benefit. Unlike regular loans, truck financing does not require collateral. This is because the truck also serves as the collateral, hence a lot safer than a traditional loan.
A truck loan also gives you full ownership of the truck upon full payment of the loan amount. Though, this does not apply to a lease as you have to return the truck when the contract ends. With a truck lease, you can also request an upgrade or a newer model to suit your business’ increasing need. This way, you can avoid your truck’s aging and ensure that your fleet has the latest trucks that continue to meet the rising needs of your business.