Leasing or financing? Which suits your rental business best?
When rental entrepreneurs consider fleet acquisitions, choosing between leasing and financing can feel like a tough decision. Both options have their pros and cons, and Rowly doesn’t take sides – the choice depends entirely on what suits your business best. Let’s see how these options stack up.
Leasing – flexible and predictable
Benefits of leasing:
- Tax-deductible payments: Monthly leasing fees are often fully deductible for tax purposes, unlike financing, where only depreciation is deductible. This can offer a nice tax advantage.
- Predictable costs: Fixed monthly payments over the contract period make budgeting easier, with no surprises.
- No large initial investment: Leasing allows you to acquire equipment without a big upfront cost, freeing up capital for other growth opportunities.
- Easy fleet upgrades: Leasing makes it easy to update to newer models at the end of the term without resale hassles – just swap the old for the new.
Drawbacks of leasing:
- Mileage limits and fees: Most leasing contracts come with mileage limits, and exceeding them can incur additional costs.
- No ownership: You won’t own the fleet, which means no resale value. This could be a dealbreaker if you plan to keep the fleet long-term.
Financing – ownership and long-term control
Benefits of financing:
- Ownership: Once you’ve paid off the financing, the fleet becomes an asset you own, allowing you to benefit from resale value and maximize ROI.
- Full control and customization: Customize your fleet as you like – add logos, upgrade features, or modify vehicles to fit your needs.
- No mileage restrictions: With owned vehicles, there are no mileage limits, so you can drive as much as you need without extra fees.
Drawbacks of financing::
- Higher monthly payments and initial costs: Financing often means higher monthly payments and a substantial initial investment, which may tie up capital.
- Maintenance costs: As the owner, you’re responsible for all upkeep and repair costs, which can add up as the fleet ages.
Leasing or financing – Which to choose?
Leasing can be a great choice if your business needs flexibility and predictability without large upfront costs. It’s ideal for small to medium businesses wanting regular fleet updates and budget control.
Financing, however, might be better if you aim for ownership and want to leverage resale value. It’s a good option for businesses with long-term needs, desiring full control and customization.
Let’s Roll!
Rowly won’t choose for you – the decision is yours, based on what best supports your business. Whatever you choose, remember that the most important thing is to keep things moving smoothly and your fleet on the road.
Let’s keep it rolling!
