Find the best option for commercial vehicle leasing for your business.
Which type of commercial vehicle lease is best for your business? Choosing the right lease for your vehicles is a big deal. It can impact your budget, taxes, and even your day-to-day operations.
Glesby Marks are experts in commercial vehicle leasing and can find the perfect solution for your business. Contact us today for a vehicle leasing consultation.
How Do Fleet Operating Leases Work?
Operating leases are good if you need flexibility and lower upfront costs when acquiring commercial vehicles. Think of it like renting an apartment – you use the vehicle for a specific period (the lease term) and then return it to the lessor.
These leases offer off-balance sheet financing. This means the lease doesn’t appear as a liability on your company’s balance sheet, which can be advantageous for maintaining a healthy debt-to-equity ratio.
Compared to capital leases, operating leases typically have lower monthly payments, making them attractive for businesses looking to conserve cash flow. Plus, they have greater flexibility, allowing you to easily upgrade to newer vehicles or adjust their fleet size at the end of the lease term.
Benefits of Operating Leasing for Commercial Vehicles
- Predictable expenses: With fixed monthly payments, you can easily budget for your vehicle costs.
- Reduced administrative burden: The lessor typically handles maintenance and repairs, saving you time and hassle.
- Simplified accounting: Operating leases are generally easier to account for than capital leases.
However, it’s important to consider the potential drawbacks. You don’t own the vehicle at the end of the lease term, and while monthly payments are lower, the total cost over the long term might be higher compared to a capital lease.
Are Capital Leases Better for My Business?
If an operating lease is like renting, a capital lease is more akin to buying a house with a mortgage. With a capital lease, you assume more ownership-like responsibilities and benefits, making it a suitable option for businesses seeking long-term use of a specific vehicle.
Unlike operating leases, capital leases are recorded as assets and liabilities on your company’s balance sheet. This impacts your debt ratio and can affect your ability to secure other financing.
Capital leases typically have higher monthly payments compared to operating leases, reflecting the eventual ownership transfer. However, at the end of the lease term, you typically have the option to purchase the vehicle for a nominal fee, effectively transferring ownership to you.
Benefits of Capital Leases
- Ownership: You gain ownership of the vehicle at the end of the lease term, allowing you to continue using it or sell it.
- No mileage restrictions: You can drive the vehicle as much as you need without worrying about mileage limits.
- Tax advantages: Capital leases offer potential tax benefits, such as depreciation deductions, which can reduce your tax liability.
However, capital leases come with higher upfront costs. You may need to make a larger down payment compared to an operating lease, and you’re typically responsible for maintaining and repairing the vehicle throughout the lease term.
Choosing the Right Commercial Vehicle Leasing Option
Assess your current budget and cash flow. Can you afford higher monthly payments associated with a capital lease, or do you prefer the lower payments of an operating lease?
How will you be using the vehicle? If you anticipate high mileage or need a specialized vehicle for the long haul, a capital lease might be more suitable. For shorter-term needs or less frequent usage, an operating lease could be preferable.
Consult with your accountant to understand the potential tax benefits associated with each lease type. Capital leases often offer depreciation deductions, which can reduce your tax burden.
Align your lease choice with your long-term business goals. If you prioritize flexibility and upgrading to newer vehicles regularly, an operating lease offers that advantage. If building equity and owning the vehicle is important, a capital lease makes more sense.
Commercial Vehicle Leasing Made Simple
Need help navigating the complexities of commercial vehicle leasing? Glesby Marks is your trusted partner. Contact us today for expert guidance and flexible leasing solutions tailored to your business. We’ll help you find the best lease structure to keep your business moving forward.