Lease vs. Own

We all know CASH is king. Making sure that you optimize your cash flow is critical to a growing fleet. Having positive cash flow allows you to fund real estate transactions, place money down on equipment or upgrade parts of your business. Cash also keeps the balance sheet healthy.

Regardless of the size of your fleet you can’t have maintenance coverage everywhere. When you lease equipment, your leasing partner will have established networks that can handle everything from preventative maintenance to breakdowns 24/7 throughout the country. Leasing companies can leverage their size and scale to serve you better. Technicians are in high demand and garage space is costly. Working with a national leasing company will help fill in the gap and provide 24/7 solutions wherever you go.

Your leasing company can be an extension of your back office. They cannot only support you with a wide variety of specs, terms and age of equipment, they can match it to your specific needs and terms. Let the experts in taxes, licensing, and regulatory take care of you while you focus on moving freight.

If you purchase a large group of assets, you will have to replace that group down the road leading to a replacement bubble that will affect productivity. You can use leasing to match the term of your contracts so you don’t get stuck with under-utilized assets. Idle equipment can be a real drag on the balance sheet.

Focus on what you do best, moving freight. Owning all your assets and opening a used trailer department takes away from head count that can drive growth or service your customers. Let your leasing company manage aged obsolescence and the disposal of older assets. You can limit your risk in a downturn by having a balanced fleet that correlates to your current business needs.

We have never heard anyone say, “let’s pay more taxes”. If you are doing well and making money, depreciation from trailers is a good thing. Consult your accountant on how much depreciation you need to manage risk and lessen your tax burden.

While still taking cash flow into account, leveraging tax-based financing can certainly be of benefit. Lower payments mean more cash and understanding your company’s needs are critical to choosing the right tax-based financing.

In some cases, dealers will have a captive financing option available. This will be easier and will not tie up your lines of credit. Typically, these captives may also take more risks and have a better understanding of residual positions.

There will be times when it simply makes more sense to own the asset versus leasing. For example, in the case of specialized equipment or equipment that fits your long term business strategy. As long as you are considering all your options and not taking a “this is the way we have always done it" approach. Research your different options and pull the right levers.