We all know that trucks are expensive machines to own and operate. Sometimes in our business we might need a temporary boost for an especially big job. Instead of owning outright, we lease instead.
Operating leases are the solution to gaining access to trucks and vehicles for a short-term without taking on the costs of ownership. Here are the benefits of operating leases for business.
An Operating Lease in practice
An operating lease is an agreement between your business and a finance company to use a truck or vehicle for set period. You pay the finance company a fee much like a loan – lease fees are calculated using interest rates – and you can operate the truck over that lease term. At the end of the lease term, you hand the truck or vehicle back to the company. Some lease agreements may insist you keep the truck in reasonable condition or under a certain kilometre limit, though what that means can vary.
All repayments or “rent” are classified as operating expenses and is suitable for “off the books” accounting methods.
Flexible and temporary
An operating lease has a fixed term and the full cost is divided across the regular fixed payments for the term of the lease. Terms can range between one year to five years – though there is even more leeway for longer or shorter terms.
One truck or an entire fleet – without the admin
Fleet management is made easier with operating leases. Many medium and larger sized businesses find they save significantly on operating costs by leaving most of their administration to an operating lease. Leases can get businesses moving quicker as they take on improved jobs as they may access more trucks. Even in smaller businesses or owner-drivers find that an operating lease works well because it removes the burden of ownership, registration, insurance, and maintenance.
Fully maintained leases are less hassle
Businesses can select two types of leases – fully maintained and non-maintained operating lease. A fully-maintained operating lease means that your bank or lender takes responsibility for maintaining the truck – insurance, servicing, registration, etc. The non-maintained lease is the opposite – you will have to pay out of pocket for all these costs. With any operating lease, you need to keep your truck is as good condition as possible for when you hand it back. A fully maintained lease is more common as it gives businesses peace of mind. A fully maintained lease will incorporate some of these costs into the repayments.
How to find a good lease
Savvy Managing Director and finance expert Bill Tsouvalas says that businesses should approach a specialist broker to find a lease that suits their needs. “A broker saves a business so much time and money as they can look for good leases through the panel of financiers. They can compare many rates and packages at the same time and can help tailor a package that optimises your business for growth.”
Remember to consult a financial professional before committing to any financial decision.
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