Working through considerations in the choice to take the route of a traditional loan, TRAC lease or full-service lease (with maintenance contracts included but no option to purchase at end) toward acquiring equipment, consider all terms, particularly with respect to lease agreements.
Individual owner-operators' situations will vary, but working with an equipment dealer/leasing company, consider doing all of the following that apply:
- Spec the most common type of truck for your application to maximize resale value.
- Compare the stated residual value with the resale value of a similarly aged truck. Ask to see the truck’s maintenance records before signing the lease.
- Don’t rush. Check out two or more lease deals. If possible, have an accountant or attorney look at the deals. Try to negotiate.
- Get a written cost comparison between an outright purchase and a lease from each dealer. Have your accountant assess each.
- Make your lease term as short as possible, and know what happens at the end of the lease.
- Make sure there are no mileage limitations. If there are, make sure they're well within the mileage plans of your operation. Be aware of alteration restrictions.
- Unless you're in a full-service lease where you're not responsible for most maintenance, make sure warranties pass through to you.
- Find out when payments are due and what to do in case of an accident or damage.
- Understand the conditions under which you can get out of the lease.
- Before signing a lease, consider maintenance funds with respect to what you're responsible for.
- Understand how the IRS views the agreement. If the lease does not include a buy option, you will never be able to depreciate the vehicle on your taxes, but during any lease's term you will write off payments as an expense.
- Read the fine print on lease agreements to look out for insurance requirements. Some will include a requirement for “any auto” coverage, which can be difficult to obtain for owner-operators.
The following comparison table charts three different acquisition scenarios in 60-months deals to illustrate common terms and outcomes of traditional loans, TRAC lease with purchase options at term's end, and a full-service lease/rental scenario. Terms reflect a those of buyer/lessee with experience and good credit ratings.
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