Building a business fleet? You might have come to a financial fork in the road: buy or lease?

Both options might get your team on the move, but it’s important to select the one that actually suits your business structure. This guide explains some of the important considerations you should be taking including tax, ownership and flexibility.

Loans Unlimited is proud to have helped countless Western Australian business get approved for fleet finance. To learn more, contact our crew.

What’s the Difference?

Let’s start with the basics:

• Buying a vehicle means your business owns the asset, whether it be outright or through a loan

• Leasing means you rent the vehicle for a set term, often with the option to purchase it at the end

At Loans Unlimited, we can assist with both methods of fleet finance. Our crew will assess your budget, growth plans and asset management to determine which is the best path for you.

6 Things To Consider

Upfront Costs

Making a purchase will typically require a deposit, regardless of whether you’re buying outright or financing with a loan. That will mean a higher initial outlay if you’re purchasing multiple vehicles. Leasing, however, will involve lower upfront costs, if any at all. That can be a big advantage for cash conscious or new businesses.

Monthly Repayments

Lease payments usually only cover the depreciation and rental value, not the full price of the vehicle. That means the monthly costs are often lower than if you were to purchase the same truck. However, buying through a truck loan allows you to structure the loan in a way that suits your cash flow. You’ll open your businesses up to balloon payments and longer terms to help reduce the monthly squeeze.

Ownership and Equity

When you buy, you own. That can strengthen the business’ balance sheet and gives you the chance to sell, upgrade or modify vehicles as you need.

But if you lease, you don’t own the vehicles. That means:

• No asset on your books

• No residual value or resale options

• Limited ability to modify the vehicle

If your business would benefit from long term ownership and asset equity, buying is the best way to go.

Tax and Accounting Differences

Buying and leasing both come with tax advantages, but they do differ:

• Buying: You may be able to claim depreciation, interest on the loan and GST credits (depending on how the vehicle is used).

• Leasing: Typically, lease payments are seen as an operating expense and will be fully tax-deductible, simplifying your accounting.

To get a clear idea of what works for your business’ structure, speak with an accountant or contact our crew.

Fleet Flexibility and Upgrades

If you’re fleet needs regular rotations, leases with shorter terms can give you that flexibility. Once each contract reaches its end, you can upgrade to a new model, extend the agreement or renegotiate terms. Whilst buying might give you full control of the asset, you’ll have sole responsibility for selling and trading in when it’s time to upgrade.

End-of-Term Considerations

At the end of a commercial vehicle rent agreement, you’re left with three choices:

• Returning the vehicle

• Extending the lease

• Buying the vehicle at its residual value

On the other hand, making an outright purchase lets you decide when/if you want to sell. You also won’t have to face the excess wear charges and mileage limits that are common in lease agreements.

Which Is Right for Your Fleet?

Let’s visualise all of that:

Get Approved for an Auto Fleet Loan Today

Putting a fleet together isn’t just about finding the right vehicles. It’s important to consider cash flow, tax implications and how you hope your business will grow over time.

At Loans Unlimited, we’ve helped all kinds of Western Australian business find the best solution to financing their fleet. Our crew will explain your options clearly, crunch the numbers and guide you through all the paperwork.

To learn more about buying, leasing or renting to own a truck, get in touch with our crew or start your pre – approval by clicking ‘Apply Now’.