Published March 2002

Lease or buy? Both options have pros, cons

Need utility vans, trucks, delivery vehicles or other working wheels for your business?

Leasing rather than purchasing vehicles has its advantages. But while it’s important to consider all of the benefits, it’s also important to be sure leasing is really better for your specific needs than purchasing.

First, do some basic research, a step that the Internet makes easy these days. Then visit a dealer who handles the brand of vehicle that interests you, since nearly every dealer will offer leasing plans. Other leasing resources come from companies specializing in single- and fleet-vehicle leasing, so shop around.

Basically, the differences are simple.

Purchasing gives you ownership, usually at flexible terms and interest rates. There are no restrictions or extra charges for excess wear and tear on the vehicles and you build equity in your fleet.

Leasing, on the other hand, means having more cash on hand (or less debt) because you didn't have to purchase one or more vehicles, having lower monthly payments than purchasing and flexible terms with various options at lease end, including a choice between open- or closed-end leases.

If your business needs vehicles, leasing allows you to avoid a major investment that will only depreciate. Also, leasing keeps your fleet up to date with the latest vehicles so you can take advantage of the newest technology — from engines to in-vehicle Internet and GPS features.

Leasing also avoids at least some of the financial expense of keeping a fleet of vehicles maintained and running properly.

In general, leasing can be useful for improving your cash flow, preserving capital and lowering up-front taxes.

Studies have shown that as vehicles age and mileage increases, a business will experience more downtime and more repair expenses. Obtaining new vehicles more often through leasing can reduce those “old” vehicle expenses and garage time.

There’s also a marketing factor. Driving newer vehicles, made possible by your leasing program, provides a successful, professional image for your company.

At the end of most leases, the vehicle must be returned if the lessee doesn’t exercise the purchase option, at the price set at the lease signing. Also, there can be excess wear fees charged at the end of the lease.

But checking around can pay off. Some companies offer more variety of vehicles — from trucks to vans to construction excavators and dump trucks; some will extend the manufacturer’s warranty up to 100,000 miles.

There may also be fleet discounts, cash rebates, free or discounted bins, shelving packages and toolboxes. Also, be sure to check whether you can apply company signage on your leased vehicles.

No matter what you learn about leasing in general, different plans vary in their specifics. Find the one that’s right for you.

There are also leasing services and financing available from such sources as GE Capital, which finances leases for vehicles from panel trucks to long-haul tractor rigs. The company also has a national network of more than 400 service centers and 20,000 affiliated vendors to handle maintenance needs, tires and roadside assistance.

If you don’t have the time to maintain and service your fleet of commercial vehicles, check with local vehicle dealerships for fleet management services.

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