These days, in the construction industry, more and more contractors are choosing to lease vehicles and other forms of transportation, rather than purchasing them. Today, we are exploring that essential question. Why? Why are more contractors leasing, rather than purchasing?
With the Crash Of 2008, a few things happened. One of those things has to do with loans and taking out business loans. Banks and other certified lenders have been far more hesitant to give out certified business loans, due to the economic hardships that we’ve all faced since the Crash Of 2008. This means that fewer and fewer construction businesses – and business in general – have been able to attain the initial funding and financing that they need in order to build their business.
Since you’re in the construction industry, you have a need for inexpensive transportation. When you’re starting off, you don’t have a lot of money and you need a way to attain cost-effective transportation. Loans made this quite a bit easier, but it’s a lot harder to get a good loan these days. And, of course, there is the prospect that, if the business fails, you still have to pay back the loan along with interest.
Then, there is the fact that if you take out this loan, and if you buy a bunch of trucks, for example, this becomes a business asset. This asset depreciates, which means that it loses value as time goes on. So, if you buy a bunch of brand new trucks, those assets will lose value as time goes by. That’s not to say that you can’t purchase used vehicles, but depending on how many you need, you will still need to take out a sizable loan. Those assets will have already depreciated in value by a substantial amount. Not to mention you may need to deal with a number of invisible costs for repairs and other things that will pop up. In the end, it’s easy to see why so many contractors are leasing, rather than taking out a big loan to purchase vehicles that are inherently going to depreciate in value.
Leasing has become a popular option for the reasons given above, and simply because there is far more flexibility inherent in leasing, rather than purchasing. More than that, lease payments allow you to align them with your cash-flow, and you have less to worry about since you aren’t taking out a loan that grows larger and larger with interest. However, depending on how long your projects take and a number of other factors that do add up, leasing may actually be more expensive. This is due to most leasing organizations knowing full well that, when you’re running a construction business, you need transportation and are willing to pay extra for speedy, efficient options.
Renting is a new trend that small businesses are using to save money. Businesses, like Flex Fleet Rental, have a huge fleet of trucks that they rent out. If you are thinking of a rental as a bad thing, think again. You can rent based on project and get exactly what you need for how long you need. No more wasted money on equipment not being used.