Truck Leasing - Pros and Cons
Should you lease your new truck — or buy? Why?
Trucks are leased for both personal use and commercial (business) use. There are significant differences in how each type of lease works.
Personal truck leasing
Need a new pickup truck with low monthly payments? A closed-end personal lease might be the answer..
To lease a truck for personal use is no different than leasing a car or SUV. A lease offers lower monthly payments than buying with a loan, and may not require a down payment. There are also savings on sales tax in most states. Therefore, leasing may cost you less to get into a new truck, and can save you on monthly cost as well.
However, before making a decision about whether to lease or buy, understand that leasing is best for people who drive no more than about 15,000 miles per year, like to have a new truck every 3-4 years, take good care of their vehicles, don't care about building ownership equity, and have a stable lifestyle such that they won't need to end the lease early.
Ending a lease early can be very expensive. It's more than simply paying termination fees. It means paying the balance of the lease, considering the wholesale auction value of the truck. In most cases, ending a lease early is very impractical. Therefore, if you think you might not be able to complete a lease, then don't lease.
If you plan on using your truck for heavy duty or rough utility purposes, such that the body and bed might be damaged or badly scratched, you might not want to lease. The reason is you may have to pay for those damages at lease-end when you return your truck to the lease company. Any damages beyond "normal" wear and tear can result in charges to you. Of course, you could get the repairs done yourself prior to returning your leased truck. Or, if you decide to purchase your vehicle at lease-end, the damages won't matter.
Also be aware that many trucks do not have high lease-end residual values, as might a family sedan or luxury car. This can make it more expensive to lease a truck than a comparable car of the same price. There are exceptions of course. The Ford F-150 is an example of a truck that maintains good residual value and makes a good lease vehicle. Our Lease Kit contains a full list of average car and truck residual values and lease ratings.
You can expect lease payments on your truck to be approximately 30%-60% less than comparable loan payments for the same vehicle, same terms. If you watch for manufacturer-sponsored lease deals, you can get even better terms (see Best Car Deals)
Since price is the most important factor in a lease deal, look for rebates and dealer discounts. We recommend getting dealer price quotes, which will include any available rebates and discounts, from InvoiceDealers, Edmunds, and TrueCar
. It is best to get multiple quotes so that you have plenty of prices to compare and choose from.
If you need to understand more about how truck leasing works and how not to make mistakes, see our Lease Guide.
Business and Commercial Truck Leasing
Truck leasing for commercial or business use is different than personal vehicle leasing.
First, the type of lease used for commercial business truck leasing is different. Most business vehicle leases are "open-end" leases, while personal leases are "closed-end."
Open-end leases have flexible lease-end residuals and are less structured to allow a company to use the vehicle as they need to, and pay for that use at lease-end. Monthly payments are higher than for personal leases and lease-end cost risk is higher. However, these costs are all tax deductible.
Commercial truck and van leases are available from companies who specialize in fleet leasing, commercial equipment leasing, and commercial rentals.
Commercial truck leasing offers a number of advantages over outright purchases or financed ownership:
No up-front investment and lower monthly expenses. Operating funds and capital are preserved for more useful purposes.
Truck leasing companies exist all over the U.S. and Canada. Companies such as Penske, Ryder, PacLease, NationaLease, Merchants Leasing, and many others are examples. Search online or look in your local telephone yellow pages for truck lease companies in your area.
Summary
Personal truck leasing is usually with a closed-end lease, that has low payments, a fixed lease-end residual value, places loss-of-value risk on the lessor, has little tax benefit (sales tax only) and otherwise works exactly like a car or SUV lease.
A business truck lease is an open-end lease that preserves capital, is very flexible, has higher payments, has tax benefits (when used for business purposes), and places loss-of-value risk on the lessee.
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