Should I Buy or Lease My Truck as an Owner-Operator?

There are many benefits to making the leap into being an independent owner-operator. You have the freedom to choose jobs with greater scrutiny and you can also increase your cash flow dramatically. However, there’s a lot more to plan for and manage, as you will now be a business owner.

One of the biggest decisions you will have to make at the start of the process is deciding between buying your truck or leasing it. There are pros and cons to either option, and it can be challenging to decide.

Crunch the numbers, build your business plan, and settle on the approach that works best for you. Below are some of the top benefits and disadvantages to leasing and buying your truck to help you make a final decision.

Why You Should Lease Your Big Truck

Leasing is sometimes a safer option than buying. Just like a home renter, a lease gives you the realistic option to change course if you want to get a different truck at a later date or even discontinue your independent operation. Though you can certainly do that when you own, you are also tied to a vehicle that you are legally obligated to continue paying.

Leasing is also a possible open-door for a purchase. For example, many leases will offer a buy-out at the end of the lease term, but it often will not be as good of a deal as if you bought it upfront.

Also, if you want a different truck, you can simply switch it out at the end of your lease. This is great for those who want to experiment with different models over time, or if you aren’t sure what type of model will work best for the types of loads you want to haul.

One often overlooked positive of leasing is easier maintenance. Typically, the lessor will cover various costs related to maintenance either partially or fully. They want to keep their truck in good condition, and this means making sure it is being run properly (they will end up getting it back!). 

However, maintenance help is not always guaranteed and should be addressed in detail in the lease agreement so that you know exactly what you are getting into.

The Cons of Leasing Your Big Truck

Leasing carries a few clear-cut cons. Firstly, you have to agree to terms and conditions of use set by the lessor. This may include mileage restrictions, specific insurance coverage, and more.

There is also usually a lease break penalty if you decide to return the truck prior to the term date. A typical lease time frame is three to five years. 

Returning it early incurs a pretty sizable penalty, though it pales in comparison to the potential costs of defaulting on an auto loan when you buy. 

If you do decide to buy the truck at the end of the lease, keep in mind: this cost combined with all your past payments will almost certainly be higher than if you just bought it in the first place.

A lease arrangement may also tie you to a certain provider, especially if that provider owns the truck and only authorizes it for certain work. Consider leasing from a third party to avoid this issue.

Why You Should Buy Your Big Truck

If you only account for finances, it is hard to argue that buying isn’t the best deal. Instead of tossing money into a vehicle you don’t currently own, every auto payment is going towards equity in your truck. 

Upon the final payment, you own an asset in the business. You can sell it for direct profit or leverage it for an upgraded truck. Your insurance coverage is also more flexible because you have greater control of how much you want covered. 

This is unlike a lease, where the lessor determines what they require coverage for. Truck buyers can also take advantage of several tax benefits pertaining to independent truck ownership (there are also many tax benefits to leasing, and those should be discussed in detail with your accountant).

Finally, many truck loans are paid monthly with more flexibility, as opposed to the weekly payments of many truck leases. This allows for more flexible budgeting, which is especially significant when your business is in the early stages.

The Cons of Buying a Truck

Buying usually requires a far higher down payment. It is possible to lease a truck with little to no down payment. Buying, on the other hand, typically requires around 10% to 25% depending if the truck is used or new. When trucks cost upwards of $80,000 to $175,000, this can be a massive expense. 

Even if you can work around the finances, you also may run into the issue of a guaranteed work agreement. The financier sometimes won’t approve the loan if they don’t know with confidence that you are eligible to work or that you will have work for the duration of the loan. 

It is common to have to provide a carrier letter ensuring that you are eligible to work, and even have assured miles on the road. However, requirements vary from one financer to another, so you can do some shopping to find one that doesn’t push you for as many upfront documents.

After all this, the answer of whether you should buy or lease is not clear. There are many things to look at. While both are significant expenses, buying builds equity in an asset, and the other is a safer and more practical step.

Look at the specifics of your situation, your current capital, and your business goals. Get advice from other owner-operators on your specific situation. Ultimately, it is great to have options. If both leasing and buying seem good and viable, then you are already in a great position as an owner-operator

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Mitchell Alverson