The Difference Between Capital Leasing and Operating Leasing

corporate fleet leasingWhen looking at corporate fleet leasing options, it can be difficult to decide which is best for your needs. Generally, there are two types of commercial vehicle leasing: capital leasing and operating leasing. In order to make the best decision for your fleet, you should understand the differences between the two. Each has benefits, and therefore you should take a good look at your operations to choose between capital leasing and operating leasing. This will help you make an informed decision to get the best outcomes for your fleet.

Capital Leasing

A capital lease is best for companies who want their vehicles to be listed as assets on their balance sheet. Capital leasing operates similar to a loan. At the end of the lease term, there is usually an option for a transfer of ownership or to purchase the vehicles at a discounted rate. This corporate fleet leasing option usually is for a term of about three-quarters of the vehicle’s lifespan. Therefore, it is the better option if you want to keep your fleet vehicles for a longer period of time. Additionally, with capital leases, the lessee pays for insurance, taxes, and maintenance for the fleet vehicles.

Operating Leasing

The other option for corporate fleet leasing is operating leasing. These leases are more similar to renting an apartment. The lease payments are considered operating costs and are therefore tax deductible for your company. These vehicles are given as a right to use only, and therefore the lessee just pays their monthly payment and maintenance costs. This option allows for greater flexibility in lease terms and upgrades, as they are usually for a shorter period of time.

Determining the Best Corporate Fleet Leasing Option for You

Even knowing the difference between these options, it can still be hard to decide which will be best for your company. If you want to keep your vehicles for more than five years and wish to own your fleet after the lease terms, capital leasing is the way to go. It is more similar to the way one would traditionally purchase a vehicle or a fleet. Accounting-wise, it decreases your taxable income, as the interest is considered debt.

On the other hand, if you want the ability to change to newer vehicles at the end of your lease term, or if you want to upgrade your fleet at the end of the lease, this is the best option for you. For this corporate fleet leasing option, your accountant will list your lease payments as operating costs. Those payments are tax deductible and don’t appear on your balance sheet.

At Glesby Marks, we offer corporate fleet leasing, commercial vehicle leasing, and even heavy equipment leasing. We are your one stop shop for your company’s vehicle and equipment needs. Our teams have been providing convenient, cost-effective leasing solutions since 1976. Therefore, Glesby Marks has the knowledge and expertise necessary to help you find the best fleet leasing options for you.  Call us today at (800) 482-9498 to schedule a consultation with our expert team. We are here to serve you.

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