Buying New Trucks or Opting for Truck Leasing Agreements?
If you need a truck for your personal or business needs, one of the first things you will consider is whether you should purchase a new one. Another possibility is to rent a truck first, see how well it suits you, and decide later if you want to buy it.
Truck leasing agreements offer people a chance to test drive a vehicle before purchasing it.
What Is a Truck Lease Agreement?
Purchasing a truck is a big responsibility since it means you need to secure the financial resources and make a substantial investment. If you are still not sure whether you will operate a truck regularly and how often you will use it, leasing it can be a good way to answer those questions.
Lots of people opt for leasing a truck as it turns out to be more affordable in some cases. A truck lease agreement is a contract you need to sign if you want to rent a vehicle. In this arrangement, you:
- Are not the owner of the vehicle
- Pay lease costs to drive the vehicle you have chosen
- Need to return it and settle any due obligations at the end of the lease agreement
Is Leasing Different From Purchasing a Truck With a Loan?
Leasing a truck or buying one with a loan are similar in a way that you need to make regular payments for both.
Apart from that, leasing a vehicle differs from purchasing one because you are not:
- The owner of the truck, once you have settled your loan obligations
- Able to use it in any way you wish
- Free to sell the leased truck or trade it in
Which One Is Lower—Truck Lease or Loan Payments?
Lease payments are usually lower than your loan payments since new vehicles depreciate, i.e., their value reduces the moment you start driving them. The price additionally decreases with age and mileage.
To get a better picture, here is what both of these payments include:
|Lease Payments||Loan Payments|
When you lease a truck, your payments will cover only a part of the value of the truck you operate during the time you drive it. These payments do not include the entire cost of the truck
|When you buy a truck with a loan, you need to pay:
When you opt for truck leasing agreements, you will be able to deduct the expenses for each leased month from your business taxes. It will substantially contribute to the reduction of your tax burden.
You can find more information on payments on the website of the Federal Reserve System.
Basic Components of Truck Leasing Agreements
Depending on whether you are going to lease a vehicle for personal or business use, truck leasing agreements can vary.
Here is a list of some common components:
- The lessee’s information
- The lessor’s information
- Vehicle details
- A list of all lease costs, including the retail value of the rented truck
- Obligations of the lessee
- Inspection terms
- Event of default
- Excessive wear and tear provisions, including maintenance and repair
- Vehicle return terms and conditions
- Realized value definition
- General provisions, including terms regarding a third party, amendments, or dispute settlement
- Itemization of the gross capitalized cost
- Calculation of monthly payments
If you would like to see examples of truck leasing agreements, you can visit the website of the U.S. Securities and Exchange Commission.
What Can You Do When Your Truck Lease Agreement Ends?
Once your truck lease agreement ends, you can choose one of the following options:
- Trade the truck in—If you opt for this option, you will replace the lease agreement with a new one
- Purchase the truck—If the truck suits your needs, you can decide to buy it once your lease agreement ends
- Say goodbye to the truck and lease—If you do not wish to lease another truck once your agreement ends, you should settle any due obligations and return your truck
The purchase price of your leased truck is available in the lease agreement. This means that you can easily:
- Do research towards the end of the agreement
- Compare the market prices
- Determine if the price of the leased truck suits you
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