Purchase vs Lease

[Broompilot]

I am an advoate of not leaseing as you can see by some of my previous posts. But to all fairness I would like for someone who actually knows to put the #s to test here.

Come up with exact figures putting $30K down on a 105K truck vs keeping the down deposite or as much of it as one could. I do not know if a single lease company thats gona let a New Driver walk off there lot with 0 down. Read any commercial advertisement that blurrs thru the screen when they are talking leaseing a new Caddy or Volvo theres alot of cash down to keep those payments low and no leasing company is gona do you or me or grandma any favors they have to make a profit as well and they are also borrowing the cash to float you the lease.

I beg to differ, he who pays cash is always gona be better off but am willing to be trashed for the sake of a good argument here and I wana be proved wrong cause if I did it wrong on this vehicle I sure that heck wana do it right next time.

One last thing do not forget that I believe the Lease company will not allow you to lower the value of the vehicle during the duration of the lease, in other words your gona keep that vehicle insured for the entire sticker price during the entire duration of the agreement maybee I am wrong but I asked this a couple of months ago on this site and the Trucker/Lawyer explained it to me.

This lease company thru Idlebuster, insisted that if I was going to accept (and I read it with my own eyes) there lease that I had to take a second policy out to cover any liability should someone be injured working on this equipment. Now get this I am forced to take out a second policy to cover whos but? Not mine but theirs. This is how redicuioulis these leases can get, no thanks I dug into my own savings account and put another Vendors unit on my truck. I personally saved over 1K on 7,500 dollar unit, not including the extra insurance. Yeah it was great that I was gona only put down a couple of hundred, make 36 payments and than buy it in the end for another $500. but I still am further ahead buy paying for it.

I am in business for the long haul, not the short side of how am I gona make next months payments. Once a person starts on the slippery sloap of payment this and that and everything one will never find them selves #1 ever owning anything # 2 working for payments or being a slave to to the lender. You choose.

My truck with 40K down will be paid for in three more years maybee sooner, there should be plenty of life left in her at that point, thats when either #1 I will slow down a little #2 start banking $ for the next rig the choice will be mine not lender. And if I choose to leave this business tommorow there is enough equity and savings that I can make a years worth of payments and sell it for a fair price, if you have ever seen my truck I do not think I would have a problem selling it either.

 

[Tennesseahawk]

I don't have alot of experience in the lease department. We've leased a car, and wish we didn't take the option to buy afterwards, cause the car started screwing up almost immediately after we bought it.

As far as buying something as big as a truck, I can't see any reason to put so much money into something that won't be yours in a couple of years. The only way I see leasing as an asset is to get multiple vehicles in a short time, in order to upgrade when the lease is done. Other than that, leasing a trailer is another good idea, as you know you're getting something road-worthy.

 

[davekc]

The issue I personally see with leases is that there are too many different ones. That is why they are commonly called "a fleece"
You really need a attorney to decipher the language in them.
It is true that the initial costs are less, but in just about every instance, the truck is much higher in cost. Even worse if you try to buy it.
And as mentioned, typically insurance is higher.
The monthly payments on the vehicle are less but to continue in business, you will need another down payment for the next one. That has to be factored with the payment. The vehicle pay off will be higher than it will ever be worth. That is how the dealer makes his money.
While it would be a long post, issues around default or bancruptcy are quite different from state to state. It is a ugly situation when looking at the new bancruptcy laws that have recently passed.
What happens if you get sick, accident, or fail a physical?
Questions to consider.
A lease to me would be more attractive if you have a fleet and are turning them in quick fashion.
I prefer a cash purchase over anything. In many cases that is not a option so one really needs to research what will work for them.
Just my penny in the pond.

Davekc
owner
21 years

 

[tazman]

Hi,

Since I'm the guy who got this idea of leasing started...I'll work up some numbers at the office tomorrow and post them....

For the record...I'll be using a TRAC lease option and a conventional loan as examples....
TRAC leases (Terminal Rental Adjustment Clause) are really only way to compare numbers against the "buy" option...BTW... You won't find this lease in most car dealership finance offices....

In my analysis I'll need some other parameters like :

Initial purchase - $105K ( + all taxes and tags ???)

P.S. - Some states (NJ) require the tax to be paid upfront even in
a lease so I will show a monthly payment less taxes and then a
separate rate (6% in PA) for the monthly tax payment

Down payment - I'll use $30K for the example
Ok ???
Term - will compute for 48 and 60 months Ok ???
98% of all financing used these terms

Rate on the loan - what is normal for your current commercial loans ???
What is everyone paying now with good credit (730+)
7-8-9-10% more ???
Today, a good rate from Ford Motor Commercial Credit is about 8.5%

Residual - (for the TRAC lease) - meaning the agreed VALUE at lease end.... (1% 5% 10% 20%) of the selling price

Mileage - There is none in a TRAC lease

What I will show is amount down , amount paid over the life of the loan/lease and the monthly payment comparison...

This should at least give you a good analysis to step into the finance office when you got to buy or lease that next truck

Hopefully we will all gain some knowledge...

Thanks,

Frank in Pa.

"The Beast in the East"

 

[davekc]

If possible, can the risks be identified as to when someone is late, defaults, or stops paying. What penalties are involved?
I am thinking of the guy that may run into a health problem, accident and the like.

It would also be beneficial to list if possible as to how wear and tear is determined and other issues. By the dealer or a arbritary third party?

The other issue is the $30,000 down. That in addition to another down payment has to be calculated to replace this unit when the lease expires. That is $30,000 on the front and the back.

Should be interesting for everyone......looking forward to what you come up with.




Davekc

 

[FlameMerc]

I have had a Lease on a Cargo van Expediter. My tax man was able to deduct all lease payments and all related down payments on this lease. I know on a purchase you can't deduct payments, only depreciation and possibly sales tax applys. I stand Corrected if I'm wrong here,but my tax guy said it is a legal deduction....Good luck...Butch

 

[macmcq]

While I am new to the expediting end of things, I would never consider purchasing a truck for regular truck load freight.
I am picking up my second tractor and have just put a cargo van on the road this week, so I guess since I don't have a bankruptcy attorny on speed dial I have got something right...and it only took 20 years.
Here is my reasoning...
When we purchase a truck, we really have commited to 3 truck payments. (principal and interest, depreciation and a repair escrow)
The P&I is the only one most truck owners make and therefore their income picture is completely inaccurate. Depreciation is money lost every week on the value of our asset, which we are able to charge off against income, however, if you are not banking that figure, it is simply REAL money out the window. As for repairs, tires etc., I have always held that at least $200 a week or $.08 per mile has to be set aside for future repairs. ($200x50=an engine 0
This means that taking your average SelecTruck nightmare, our unsuspecting new owner goes into debt on a $50k truck. The P&I comes out to around $375/wk, which should be very easy to handle.
However, the reality is in addition to the P&I, that driver is losing an additional $300+ in depeciation and needs to sock away $200 more...the total real cost of ownership, $875/wk.
Now let's look at a full service lease (2290, IRP and maintenance/repair inclusive). My cost is $450/wk + $0.075/Mile.
That includes routine maintenance, tires, repairs and a replacement truck in the event of major breakdown. The real and completely deductable cost for a 3000 mile week is around $800/Wk, but most importantly, I have complete peace of mind.
Just thought I would toss in my $0.02.
Have a great one.
Mac