Is it better to rent or buy a semi trailer? Many people in the trucking industry struggle with this dilemma.
Ownership has some tax benefits and allows you to accumulate equity by adding the semitrailer as an asset. Renting, however, gives you more flexibility and is generally less expensive.
A sensible business decision
Renting a trailer becomes a sensible business decision when you have limited cash flow, a job with thin profit margins, or a seasonal business. Without significantly affecting your cash flow, renting can help you meet your short-term business needs. It is less expensive than purchasing your own trailer because you are only paying for the use of the semi-trailer.
The requirement for an initial down payment is frequently reduced or even eliminated when renting a semi-trailer. However, as part of a rental agreement, you might still be required to put down a security deposit for the trailer. Obviously, insurance costs will differ based on the rental agreement or lease and the semi-trailer’s actual value.
No maintenance Costs
Renting also eliminates the majority of the high maintenance costs. Preventive maintenance is frequently covered in full by semi-trailer leasing companies as part of the lease agreement. That implies that you won’t need to spend money on hiring maintenance staff, machinery, or tools.
In the event that something goes wrong while you are on the road, New Way Leasing customers have access to roadside assistance. You’ll feel more at ease in the event of a breakdown knowing that you are always covered by insurance. When money is tight, this is crucial, and it’s something you wouldn’t be able to get if you bought a semi-trailer.
No down time
Additionally, renting a semi-trailer makes sense if your business experiences significant seasonal growth. If your company’s transportation requirements are expanding quickly and you need a simple and effective way to keep up with your customers, renting is the best option. A trailer won’t remain unused and idle while you’re still in operation and business slows down as quickly as it started.
What about tax benefits?
All lease payments made for a semi-trailer are tax deductible. However, because leasing is less expensive than buying, you won’t enjoy the same tax benefits as ownership.
On the other hand, a semi-trailer that you buy outright is immediately recorded on your books as an asset that is subject to depreciation. Similarly, any loan taken out to purchase a new semi-trailer also counts as an expense for the business.
Financially speaking, the acquisition of a semi-trailer entitles you to write off any loan interest as a business expense. Additionally, you can claim a deduction by depreciating the asset.
Even though owning has tax benefits, you can record a rented trailer as an expense rather than an asset on your books. Additionally, if your business needs or the needs of your clients change, renting gives you the flexibility to quickly upgrade your equipment. The main drawback of renting is that you won’t accumulate equity the way you would with a purchase.
So how do you decide if renting is the right decision for you?
Before choosing to buy or lease a semi-trailer, always consult with your accountant or tax lawyer.
After that, begin weighing your options with a company like New Way Leasing. Our experts can advise you on the best strategy for your business.
The knowledgeable staff at New Way Leasing will assist you in locating the ideal trailer to suit your precise requirements. Call us now to learn how we can assist.