# Lease or Buy?



## Nathan (Jul 21, 2003)

Does your company lease or buy its vehicles and why?


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## hatchet (Oct 27, 2003)

The company I work for buys all of theirs. I couldn't tell you why.. maybe because the amount of miles put on them outweight the benefits of leasing.


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## Nathan (Jul 21, 2003)

There are tax advantages to leasing though. 
I'm working with someone now who may be able to offer members of Contractors Chat Room leases on commercial vehicles at a great rate... and $1 buy out at the end of the lease! You can put signage on the vehicle and don't have to worry about mileage because you will own it for $1 at the end of your lease term.


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## Guest (Jan 31, 2004)

Nathan said:


> There are tax advantages to leasing though.
> I'm working with someone now who may be able to offer members of Contractors Chat Room leases on commercial vehicles at a great rate... and $1 buy out at the end of the lease! You can put signage on the vehicle and don't have to worry about mileage because you will own it for $1 at the end of your lease term.


What are the tax advantages to this type of lease. would you account for these as an off-balance sheet lease?


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## hatchet (Oct 27, 2003)

Nathan,
Our equipment manager goes down to the local GMC/Chevy dealer and starts pointing at trucks... that one, that one, etc. I watched him buy 6 trucks the other day and then have them painted the company colors and on the road in less than 5 days.


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## Grumpy (Oct 8, 2003)

When it comes to work vehicles you should definetly buy, unless you can negotiate the mileage. I put 25k miles on my truck the first year I had it. 

Here is an idea that will accomplish two things  the first is protection the second is those tax advantages Nate spoke of:

Setup a second company that basically holds all your company assets, and this second company leases those assets to you. Now you have the tax advantages of a lease, but at the same time if someone sues your company they can't get much since your company has zero assets.

Hatchet that seems like a silly purchasing method. Your copmpany is better off buying special ordering the vehicles.


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## hatchet (Oct 27, 2003)

When the annual volume is near $2 billion - 6 vehicles in a pinch isn't but a drop in the bucket. Is what happened is 6 PE's were promoted to superintendents in about a week. Typically they do order their vehicles through a dealer here in town.


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## Grumpy (Oct 8, 2003)

Sure I can understand that but look at it this way. He's picking and choosing vehicles based on how they LOOK. Personally I would have assessed their needs and bought the vehicles based on the PE's needs.


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## hatchet (Oct 27, 2003)

Not really. It was more based on need - not looks. He only chose 2 wheel drives (nobody but GS's get 4wd) no extended cabs with base packages - no LS. They all get painted yellow anyway so looks didn't come into play too much.
As I stated in my last post - typically he will order them well in advance so that type of thing doesn't happen.


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## hatchet (Oct 27, 2003)

Oh.. and as far as the PE's needs.. this company tells them what their needs are..haha. Actually that's pretty close to the truth


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## Grumpy (Oct 8, 2003)

mmmm 2 billion. That number makes me drool.

I'd be content with 2 million. I should be able to clear 500k per year in my pocket with 2 mil in sales.


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## fez-head (Mar 15, 2005)

*Does anyone lease a vehicle to thier subs or employees?*



Grumpy said:


> Here is an idea that will accomplish two things  the first is protection the second is those tax advantages Nate spoke of:.


Does anyone lease a vehicle to thier subs or employees? My sub drives his personal vehicle and it does not look professional. I have an oportunity to buy 2 late model (1999) Ford E250 vans which are identical and white for $1,500 each. 

I do some work for the owner of a distribution company and he buys them new and sells them after 280,000 miles. These vans are kept indoors when not in use and professionaly detailed(exterior only) and maintained weekly with records on all repairs.

I already own one of these vans and would like to buy the other 2 - put my sinage on them and lease them to my 2 main subs for $100 per month. 

Does any one see a negitive side to this?

I really apreciate any input or similer experiences.

Thanks
Jesse


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## Debookkeeper (Jul 23, 2006)

Jesse -

I see a few red flags. One being if these are subs - they are not employees, meaning they should have their own business license and insurance. Driving in your vehicle with your company name is a flag. How about when they are not working for you - and driving around with your company name on the truck and they get in an accident. Also - whose name is the vehicle going to be registered in? There are a few situations that could go wrong with this deal. Your best bet is to buy the vehicles and sell them to the subs. You could always hold the note - but becareful with your signs on their vehicles.


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## fez-head (Mar 15, 2005)

> I see a few red flags. One being if these are subs - they are not employees, meaning they should have their own business license and insurance. Driving in your vehicle with your company name is a flag. ‘Also - whose name is the vehicle going to be registered in?


This will be just like a regular lease anywhere else. They are responsible for licensing, insurance, maintenance etc.. In turn for cheap rental or lease rate my company name will be on the side of a nicer truck than they would normally have. 



> There are a few situations that could go wrong with this deal. Your best bet is to buy the vehicles and sell them to the subs. You could always hold the note - but becareful with your signs on their vehicles.


I am careful of the fine line between employees and subs that is why I will lease the vans to them. I provide about 95% of their work and they get paid on commission providing their own insurance, tools and other resources. They have no set hours but they know what is expected of them as professionals. 

The more professional we look the more money we can charge. I consider us business partners and not just “subs” and contractor. I don’t see how it would make a difference to the IRS what a truck or work shirt says as long as all of our ducks are in a row as far as our business relationship goes. 



> How about when they are not working for you - and driving around with your company name on the truck and they get in an accident. .


License and insurance will be in their name. I am not worried about them driving around with my company name. We have gotten all of the “wildness” out of our systems (and managed to stay out of prison unlike our past acquaintances) and are now family men with young children. I have complete trust in these guys and they are completely on board with my vision of the future including franchising or license agreements. 

Thank you for your input tho. These are things that I will be carefull with so as not to raise red flags.:thumbsup:


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## Richard (May 21, 2006)

*to answer your question...*

Buy. Because when I purchase a vehicle, I dont think, "hmm, cant wait to trade this one in, in 4 years"

When I buy vehicles, I think more along the lines of using them until _I am_ finished with them. (not when someone else says I should be)

feels good to own my work van:thumbsup: 

trucks paid off in a year 

wifes car is paid off in 7 months


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## MattCoops (Apr 7, 2006)

Lease vehicles have a mile limitation

I don't find that at all practible for a contractor

I also don't find paying thousands for something you have nothing to show for in the end practible


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## mahlere (Aug 6, 2006)

Do a search on "trac lease" - there is a huge difference between a commercial trac lease and a typical car/truck lease. 

Nathan is correct and if you are looking to buy any new equipment (truck, trailer, etc) take a look at trac leasing. There are great tax reasons for it, as well as financial reasons for you.

BTW-you own the vehicle for $1 at the end of the lease. No worries about milage.


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## IHI (Dec 25, 2004)

As a guy that is actually in the feild humping butt and hauling the mail so to speak, leasing would be susicide for me due to the typical wear and tear a wort truck gets...I would own it anyways LOL!!

I pay cash for my stuff so I never worry about payments for anything other than vendors at the end of the month...and my mortgauge of course Sure I'm not driving brand new vehicles, but I know what happens to trucks that get use as an acutal work trucks and not paper GC commuters and salesmen taxi's If I ever fit that bill, I do think I would do a lease, driving a new vehicle all the time and never worrying about maintenance....but I hate payments so we're gonna have to really hit pay dirt for me to justify ever doing that:w00t:


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## dougchips (Apr 23, 2006)

I am open to ideas...if I can get a new H2 for under $700 a month, bring it on.


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## Teetorbilt (Feb 12, 2004)

I buy. I have a friend who rents which is an interesting concept. All expenses are deductable, maintainance is included and you get new vehicles every year..........so I'm told. I keep telling myself that I'm going to research this but I've put it off for 8 yrs. now. Something smells fishy, maybe DBK can clear this up.


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## dayexco (Mar 4, 2006)

in my line of work, i'd hate to pay for the refurbish at time of turn back if we elected not to keep them. you know, a chain that gets drug over the side of a pickup box, the can of pvc glue that was left in the cab next to the heater to warm up, and gets tipped over and runs all over the carpet. not saying we're slobs at all, but sometimes "shirt" happens.


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## mahlere (Aug 6, 2006)

Nathan, good luck with this sale:sad: 

Trac leasing is a great way to purchase equipment. It lowers you upfront cost, has tax advantages over buying, and you own the equipment at the end.

Simple as that, the advantages of purchasing combined with the advantages of leasing.


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## fez-head (Mar 15, 2005)

mahlere said:


> Nathan, good luck with this sale:sad:
> 
> Trac leasing is a great way to purchase equipment. It lowers you upfront cost, has tax advantages over buying, and you own the equipment at the end.
> 
> Simple as that, the advantages of purchasing combined with the advantages of leasing.


The distribution company that I buy my vans from has some sort of lease like that from Enterprise in St. Louis. They run them up to almost 3000,000 miles then sell them to contractors like me. 

Enterprise is able to get much better rates on new vehicles than this company could on thier own.


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## IHI (Dec 25, 2004)

Jesse Kirchhoff said:


> Enterprise is able to get much better rates on new vehicles than this company could on thier own.


I hope so, Ford owns Enterprise


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## mahlere (Aug 6, 2006)

Jesse,

that's not the same thing. I am vaguely familiar with the Enterprise program, but it's not trac leasing.


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## fez-head (Mar 15, 2005)

IHI said:


> I hope so, Ford owns Enterprise


 :w00t:


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## fez-head (Mar 15, 2005)

mahlere said:


> Jesse,
> 
> that's not the same thing. I am vaguely familiar with the Enterprise program, but it's not trac leasing.



It's all greek to me. I like to find deals that are to good to pass up and pay cash.:thumbsup:


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## mahlere (Aug 6, 2006)

on the immortal words of Bill Murray:

"well, you got that going for you, which is good" 

I'd be hard pressed to pay cash up front for all of our equipment. Plus, I'm not going to find good enough deals on new or newer equipment to justify outlaying that much cash. We do trac leasing, deduct the full payment every month (no depreciation) and the equipment pays for itself. No investment on my part.


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## fez-head (Mar 15, 2005)

mahlere said:


> on the immortal words of Bill Murray:
> 
> "well, you got that going for you, which is good"
> 
> I'd be hard pressed to pay cash up front for all of our equipment. Plus, I'm not going to find good enough deals on new or newer equipment to justify outlaying that much cash. We do trac leasing, deduct the full payment every month (no depreciation) and the equipment pays for itself. No investment on my part.


That sounds like a sweet deal.:thumbup:


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## clampman (Feb 25, 2006)

Maherle,

I've always heard about this stuff, but never got off my butt to investigate. Just a few weeks ago, my account told me that is what I should be doing - leasing.

I'd be interested in listening for sure, Nathan. But I presume you'd have to get a pile of guys involved to make it worth while. True?


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## Debookkeeper (Jul 23, 2006)

Give me a week or so and I can find out the advantages. I need to meet with my CPA friend soon to discuss year end stuff. So what do we want to know? Advantages of leasing -vs- buying outright? The only thing I do know for sure is you can take your actual cost or your direct cost. Actual - depreciation of the vehicle and direct meaning, mileage, repairs, registration, etc. I will find out why one will be better than the other, and I will also find out what the equipment tax break is. It changes, and I know in the past few years it was appealing - but the vehicle had to meet certain GVW requirements. TOO much info to remember, cause I don't do that stuff everyday.


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## MarkNoV (Apr 29, 2006)

http://strategis.ic.gc.ca/epic/internet/insof-sdf.nsf/en/h_so03331e.html

Lease vs buy calculator. The CCA is Capital Cost Allowance, or the maximum depreciation that can be claimed in a year. In Canada, for a truck the rate is 30%.

Mark


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