A fleet of trucks can be acquired in one of two ways—by purchase or by lease. The determination of the best method for any fleet depends on the unique needs and circumstances of a business.
Types of Leases
There are two types of commercial truck leasing options. Open-end leases are the most popular type among commercial fleets. They generally are short term in nature, starting with one ye ar and continuing on a month-to-month basis thereafter.
They usually contain a terminal rental adjustment clause which guarantees the leasing provider a predetermined value for the vehicle upon sale at lease end. If the selling price is more than this value, the lessee is credited the surplus. If the vehicle is sold for less, the lessee is responsible for paying the difference, thereby being the inherent risk in an open-end lease.
The other commercial truck leasing option is a closed-end lease. Closed-end leases are fixed-term leases that last from two to five years. There is no risk to the lessee with close-end leases as the leasing provider bears all the responsibility for the vehicle at the end of the lease. Monthly costs may be more expensive and there are usually mileage restrictions and provisions for mechanical or physical damage.
The most significant benefit of commercial truck leasing is increased options with regard to cash flow. A lease requires a smaller investment up front than a purchase. A well-written lease agreement enables costs associated with trucks to become operating expenses and frees cash to reinvest in the company and grow the core business.
A commercial vehicle lease can also eliminate administrative costs. As the leasing provider owns the vehicle and is the titleholder, they need to handle many tasks, ranging from taxes owed to license renewals. They also have numerous fleet management responsibilities, including recordkeeping and paperwork, thereby allowing the company fleet manager to concentrate on core fleet operations.
In addition, many leasing providers offer roadside assistance programs and routine maintenance options which can often be included as part of the monthly fee. This enables companies with fleets of trucks to build these costs into their budget for operating expenses.
There are additional intangible benefits in that commercial vehicle leasing enables companies to keep a modern and attractive fleet on the road, creating a public perception of a well-maintained and highly operational company.