Lease Or Buy?

Nathan

Does your company lease or buy its vehicles and why?

__________________
Nathan

"He is no fool who gives what he cannot keep to gain that which he cannot lose." - Jim Elliot

hatchet

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.

__________________
Rich
WIT Construction Co.
Superior MT Contractor

Nathan

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.

__________________
Nathan

"He is no fool who gives what he cannot keep to gain that which he cannot lose." - Jim Elliot

Unregistered

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

hatchet

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.

__________________
Rich
WIT Construction Co.
Superior MT Contractor

Grumpy

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.

hatchet

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.

__________________
Rich
WIT Construction Co.
Superior MT Contractor

Grumpy

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.

hatchet

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.

__________________
Rich
WIT Construction Co.
Superior MT Contractor

hatchet

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

__________________
Rich
WIT Construction Co.
Superior MT Contractor

Grumpy

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.

fez-head

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

Debookkeeper

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.

fez-head

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.

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.

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.

Richard

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

trucks paid off in a year

wifes car is paid off in 7 months

__________________
Rich

MattCoops

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

__________________
Matt with Cupan Custom Tile & Paint of Lowell, Massachusetts
Design and installation of ceramic tile and natural stone for floor, wall, and countertops
(978) 601-8774 | cupantile@gmail.com | view tile pictures and more

mahlere

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.

IHI

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

__________________
Hot Rod Work Van
Car video clip
Web
The Photo Gear- Type Josh into Contact name when ordering

dougchips

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

Teetorbilt

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.

__________________
You can't solve you're problems with the same level of thinking that created the problems.

Albert Einstein