Should you rent or buy a semitrailer? It’s a question that keeps many in the trucking industry up at night.
While ownership offers some tax advantages and allows you to build up equity adding the semitrailer as an asset, renting allows you to be more flexible and is generally less expensive.
Tight cashflows and seasonal operations
When your cash flow is tight, a job that only offers slim profit margins or business operates seasonally, renting a trailer becomes a logical business decision. Renting can help you meet immediate business needs without having a significant impact on your cash flow. Since you are only paying for the use of the semitrailer, it’s less expensive than personally owning the trailer.
Renting a semitrailer often reduces or even eliminates the need for an initial down payment. However, you may still have to put down a security deposit for the trailer as a part of a rental agreement. Naturally, insurance costs will vary depending on the rental agreement or lease and the value of the semitrailer itself.
In addition, renting eliminates most of the steep maintenance costs. Companies leasing semitrailers will often include preventive maintenance as a part of a lease or will cover the expense outright. That means you will not have to invest in maintenance facilities or maintenance personnel on your payroll. Therefore, there’s no need to hire personnel for maintenance, and there’s no need for maintenance buildings, equipment or tools.
If you rent from a full-service company like Transport Services, you’ll have access to roadside assistance 24/7 should anything happen while on the road. In the event of a breakdown, knowing that there’s insurance coverage no matter what gives you more peace of mind. This is especially important when cash is tight and something you could not get if you purchased a semitrailer.
Moreover, if you have significant seasonal increases in your business, renting a semitrailer is also a logical answer. Renting is ideal if your business or transportation needs are growing very quickly and you need an easy and efficient way to keep up with your customers. If your business slows down as quickly as it picked up, a trailer won’t sit idle and unused while you still make payments.
While renting offers you greater flexibility to adjust to your changing business needs, it also allows you to keep up-to-date with technological changes in the industry. Renting also affords you the opportunity to adapt quickly to ever-changing government regulations.
Financing flexibility and benefits
When you lease a semitrailer, all of the lease payments are deductible. Unfortunately, leasing is less of an expense than purchasing, meaning you will not have as much of a tax advantage as ownership.
On the other hand, a semitrailer that you purchase outright becomes an asset on your books immediately which can depreciate. Likewise, any loan on a new semitrailer also becomes a liability as a business expense.
In regard to finances, the purchase of a semitrailer allows you to deduct any interest on the loan as a business expense. Further, you can also depreciate the asset, claiming a deduction.
Even though ownership does have tax advantages, you can classify a rented trailer as an expense on your books rather than an asset. Further, choosing to rent offers you the option of quick equipment upgrades, should your business needs or clients change. The real downside to renting is that you won’t build up equity like you would with a purchase. So how do you know if renting is right for you?
Ultimately, leasing may require the payment of sales or other use taxes, depending on your business situation. Always check with your accountant or tax attorney before you make the decision to purchase or lease a semitrailer.
How to get started
Not sure where to start? Let us guide you to the right path. We offer both renting and purchasing options with financing to fit your needs and fleet maintenance plans. Our team of executives offer sound business advice to help uncover the right option for you and your business.
Our team at Transport Services has well over 100 years of combined industry experience. They will help you find the right trailer that meets your exact trucking needs. With an extensive inventory of Dry Vans, Flatbeds and Reefers for both sale and rent in virtually every style, they’ll match the right equipment to you.
Give us a call at 440-582-4900 to find out how we can help.