Lease vs. buying: Which is better for you and why?

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“I’m just going back to buying. With interest rates being down so low, leasing companies took it in the shorts because the residuals are so low. You might as well buy right now and take your own gamble. Banks keep taking their interest rates back. I’m absolutely buying this year. Mack financing is down under 7 percent. Lease companies aren’t going to give you that. Also, lease companies have too many penalties, like you have to have a $5 million umbrella for insurance. If you ask me, leasing is not the way to go this year.”

Phillip Fall, president
Air Ground Transportation, Clinton, Pa.

“I’ve done both. Sometimes I think a lease works out better because there’s not so much cash you’re paying up front and not as much cash paid out over the long run. I haven’t looked at which is better right now because we haven’t looked at buying new equipment for the last couple of years. Instead of trading our trucks in, we’ve been sitting on them.”

Garry Booher, president
Booher Trucking Co., Croton, Ohio

“We feel that it’s better to buy, and the primary reason for that is to build equity in equipment. To be honest, we haven’t ever considered leasing.”

Sean McAllister, operations manager
Carbon Express, Warton, N.J.

“I would say we prefer to buy because we keep our equipment for a 10-year period. We run a lot of older equipment. We do lease purchase some trailers. As we acquire trailers we lease them for 3 years with an option to buy. We pay cash for tractors. We buy the older trucks.”
Larry DeJong, president
DeJong Trucking, Rippon, Calif.

“That’s a hard question because there are so many different ways of looking at it. If you’re buying, you retain ownership; leasing you give it up – if it’s the type of lease where at the end you can walk into another one. If you’re doing that, you’re going to have the responsibility for breakdowns and maintenance. You have the same thing with buying, but you also have the write off on one on a five-year period, instead of just the payment. Personally, I like to buy both tractors and trailers.”

Max Burditt, president
Burditt Trucking, Phenix City, Ala.

“We buy, but the city this past year has been looking at the lease to buy option. Regardless of whether we lease or buy, we do our own maintenance. We did try outside maintenance for a while. Ryder came in for 7 years and did it. In the beginning it was cost effective, but as the cost kept going up the city decided to take it back over. This is the third year we’ve been doing it.”

John Bozak, director of maintenance
City of Dover, Del.

“My answer is that you have more flexibility with conventional financing from the standpoint that if you need to reduce your assets, you can sell off your equipment. If you’re in a track lease, then you’re kind of locked into the lease – either running it to the end of the term or paying a real premium to get out of it. If you purchase a lease, you have to recapture the depreciation and everything else. It’s very costly. We’ve track leased some in the past. To have a successful track lease it depends on how much of a percentage you leave for a residual: 20, 40 or 50 percent. We’ve always been pretty conservative and gone on the low end. That way you’re pretty much assured it’s going to have value. It can be a really rude awakening if you set a high percentage and come to the end of the term and find out you don’t have near as much value as you think. We’re more inclined now to conventional financing because of the flexibility.”

Frank Boye, president
United Cartage Co., Inc. Gas City, Ind.