Buy, finance or lease first work truck? - Contractor Talk - Professional Construction and Remodeling Forum

Kiner · 06-27-2009, 09:53 AM

The particulars
I have been in the industry for a while, and after a short stint working in the corporate world, I have decided to start my own general contracting company doing renovations and remodeling.

I need a truck. I have 8,000 in capital to invest either in a truck or I could set it aside in a rainy day fund.

The options
1. Buy outright. Buy what I can afford, which for 8k looks like it will be a late mid to late 90's Ford/Chevy/Dodge 150 or 1500.

Pros
Ownership of a vehicle and not having to worry about dings and scratches

Cons
Having a lump-sum tax write-off instead of amortizing the tax write-offs over several years as you would be able to do with financing or leasing

Maintenance for an older vehicle.

Not as reliable as a newer vehicle.

2. Financing. Put a couple grand down and finance a newer (but not new) truck, maybe an 05 or 06 for around 16k and finance the rest over 36 months.

Pros
A newer vehicle that is consistent with my marketing plan of attracting clients in high-priced, upscale neighborhoods.

Doesn't tie up all my capital in a depreciating asset.

Resulting ownership means I won't have to worry when it gets dings and scratches.

Cons
Higher cost overall for vehicle.

Stuck with a depreciating asset at the end of the term.

Ownership equals more responsibility.

3. Leasing. Lease a newer (but not new) vehicle, maybe an 05 or 06.

Pros
A newer vehicle that is consistent with my marketing plan of attracting clients in high-priced, upscale neighborhoods.

Doesn't tie up all my capital in a depreciating asset.

Investment strategy - allows building of equity (and credit).

Cons
Since the dealer technically owns the truck, not me, I would be liable for any damage (scratches, dings) upon return of the vehicle.

I would like to know your experience with buying/leasing work vehicles. I'm leaning toward leasing, but I would appreciate someone settling my concern about damage to the vehicle.

Mike Finley · 06-27-2009, 10:08 AM

Leasing of a work truck is a hard one because of the damage components of a lease.

We use option 1 and 2.

Most recent was option 1. With some time and effort you should be able to find a pretty decent 3/4 ton work truck (non-diesel) (if all you want is a 1/2 ton it's even easier) for 4-6K and put 2-3K into it and have a pretty reliable truck for awhile. That's exactly what we did with the last one. A 2002 F250 with 130K.

Option 2 is probably a safer bet for you if you are just starting out. A newer truck would hopefully help you contain unexpected repair expenses for a little while and allow you to get going.

SLSTech · 06-27-2009, 10:19 AM

I have to agree with Mike above
Another aspect on the Leasing is the mileage, you will be amazed at how many miles you will probably put on your vehicles
I would finance it with as little down & as long as possible with the lowest interest rate you can get

Bank the money you have to help keep your head above the water - trust me 8K is nothing in a typical year between advertising, licensing fees, tax permits, insurance, your regular bills, etc...

Would you do us all a favor - post an Intro in the Introduction area & fill in your location in the profile --- Thanks

willworkforbeer · 06-27-2009, 10:55 AM

Get the best $2k truck you can and spend the rest on tools as you need them, tools make or break you.

WarnerConstInc. · 06-27-2009, 11:30 AM

I bought a 99 GMC 2500 Burban, 2 years ago for about 6500 bucks. I have spent maybe 1000 in normal repairs and a few not so normal repairs. Seems to me the best way to do it. Finance a nice used truck, there that solves all your problems.

BreyerConstruct · 06-27-2009, 12:03 PM

Get the basic reliability.
Use it.

Then buy what you need, when you need it.

~Matt

Crock · 06-27-2009, 12:07 PM

I have bought all my trucks cash in hand. I would guess it's about 12 or 13 to date.

I always finance wifey's rigs. She's driving pimped out 300 with television. Car show quality.

Kiner · 06-27-2009, 03:02 PM

Thanks for the responses. Glad to hear some critical feedback on leasing.

mahlere · 06-27-2009, 04:40 PM

look up 'Commercial truck TRAC leasing'....unless you can buy at 0%, this is the way to go...

Winchester · 06-27-2009, 06:24 PM

I lease mine. I get a new truck for payments that would be a lot less than financing. Maintenance is covered for 4 years.

mileage and damage don't matter because I plan to buy it out at the end of the lease. my buyout is 13k and I could sell it for well over 20k if I keep it in good shape.

dougger222 · 06-27-2009, 06:45 PM

Do they still do leases? I thought most car companies were getting away from that.

I've always bought used and have had good luck. Of course when you buy 2-5 year old Ford 7.3 powered trucks there's not much that can go wrong! All have been paid off early.

Bought my first daily driver for cash last month though, a bimmer for my wife. She wanted to downsize from the Excursion which I took over very happily!!!

Five Star · 06-27-2009, 09:06 PM

you can buy a good used truck these days for around 4-5k spend another few hundred to letter it,make it look professional, spend the rest of your nest egg on a few key tools,depending on what your specailizing in!
throw another 1-2k in advertising!

Then just kick back and relax and wait till all those bargain hunters start calling, after a few months i bet you,ll be behind a desk and saying to your self..?
HMMM how could i have wanted to leave this office JOB

Mike Finley · 06-28-2009, 10:02 AM

Quote:

Originally Posted by Winchester

I plan to buy it out at the end of the lease. my buyout is 13k and I could sell it for well over 20k if I keep it in good shape.

Those days are probably over. Billions lost due to fake residual values, used vehicle market flooded with returns driving down residuals even more.

Even though trucks were the last hold out of anything they made that made money and held some value, I think even that's a thing of the past. Maybe not forever but for awhile.

When is your lease up? I think there might be a little shock coming if you try to lease another one pretty soon. The game has changed some-what unfortunately.

woodchuck2 · 06-28-2009, 06:43 PM

I opted for #2 for both of my trucks. They are both in great shape and do whatever i need to do with them, one i bought new and the other used. I keep them as clean as possible, they both have very minor dings in them that are hard to see, they are both under warranty for up to 100k and not only do they look good for the customer but are a pleasure for me to drive. The only downfall is the monthly payments but this is the price for doing business. It cost money to make money IMO.

mahlere · 06-28-2009, 07:11 PM

Quote:

Originally Posted by Mike Finley

Those days are probably over. Billions lost due to fake residual values, used vehicle market flooded with returns driving down residuals even more.

Even though trucks were the last hold out of anything they made that made money and held some value, I think even that's a thing of the past. Maybe not forever but for awhile.

When is your lease up? I think there might be a little shock coming if you try to lease another one pretty soon. The game has changed some-what unfortunately.

TRAC leasing a commercial vehicle is different....it's essentially a purchase with the tax benefits of a lease...you're buyout is around $1 at the end...mileage doesn't matter...

one thing to remember with a work truck is the it's a tool...it makes you money...why blow your whole wad on a truck, when you can get the truck for little down and let it pay for itself as you go?

Mike Finley · 06-28-2009, 07:22 PM

One thing I don't understand about TRAC leasing is why? Why do that and not just finance it instead? If you are leasing it and buying at the end, why not just buy it to start with?

mahlere · 06-28-2009, 08:43 PM

taxes

http://www.bizfleet.com/trac_lease.asp

Mike Finley · 06-28-2009, 08:55 PM

Right, but we all get the same tax benefits with a purchase also, with being able to write it off. What is it? As I recall it's based on the GVW, over so much and you get to write off some huge amount if you want or depreciate it over time.

Seems to me tax benefits are a wash.

So if I bottom line it, the base line is set by paying cash.

$30,000 vehicle. Paying cash my total costs are $30,000.00

After that it's interest charges that make the difference. So whether you lease it or buy it, you have finance charges. Doesn't seem like it makes much differnce how you do it, buy it for 60 months or lease it for 36 months and buy it for 24 months at the end. The price of the truck remains constant, the difference is in the interest you pay on top of it.

So in the end when you add up the gross monthly payments that total is the bottom line.

Perhaps I'm just making this more simple than it is?

Winchester · 06-28-2009, 11:46 PM

Things are different up here as far as I can see.

If I had the cash I could go south of the border and get a vehicle for practically nothing.

My lease is still 3 years left

You may be right, things might be different by then, though.

http://vancouver.en.craigslist.ca/cto/1243938427.html

http://vancouver.en.craigslist.ca/cto/1244651100.html

...etc...

Kiner · 06-29-2009, 02:42 AM

Quote:

Originally Posted by SLSTech

I have to agree with Mike above
I would finance it with as little down & as long as possible with the lowest interest rate you can get

Bank the money you have to help keep your head above the water -

Thanks for all of your guys' help.

I have decided the best choice for me will be to finance. Thinking of putting most of that 8k down on it and finance the remainder over 48 months. I budgetted myself up to $200/month for truck payments within my overhead, which means I can go up to a purchase price of about $15,000 even with the most pessimistic interest rate on the loan. My bank is checking if I'm elligible for a loan through them.

Also, just got appoved for a 5k line of credit, so that should help float the boat (tools, materials) while i get started.

I have been obsessively scouring buysell.com and seem to be narrowing my criteria toa truck with:

less than 100,000km
4x4
No more than $15,000 total cost

In my area this means something like a 2004-2006 Ford F-150 XLT Supercab or F-250. I plan to use the extra interior in the supercab to store smaller tool boxes, big tools can go in the back. Still unsure whether to get a short bed or long bed... I can see benefits of both -

Suggestions on bed size? will i regret the gas consumption of a 3/4 ton pickup?