Identifying the source of financing for your fleet isn’t just about determining whether to buy or lease the fleet. It involves more in-depth research on the side of the buyer. You need to analyze more than just the cost of purchase but also the long term costs and that you will need to factor in like depreciation. Choosing your fleet manager will also impact on the option of financing that you chose to go with.

With these in mind, deciding whether to lease from a leasing company or buy is a good point to start. It is actually the first question that you will need to answer before deciding your next course of action.  You can read this article here to learn about the various options of financing your fleet. Each of the two options will have its own advantage and disadvantage, and as such, it is important to look at what each option offers.

Buying Your Fleet

Buying as an option will have several advantages and disadvantages when it comes to owning a fleet. If you decide to buy a fleet, you will need to be aware that you will have to commit more to repay your loans. Even if you are not using financing, it will set you back a good deal in terms of your saved up capital.

This means that if the fleet business goes down, you will have lost more as compared to having leased the vehicles. The advantage with this, however, is that at the end of the business, you will enjoy the residual value of your fleet once you dispose of it.

Leasing a Fleet

When it comes to leasing, you will not have to put in as much money as you would have when buying the fleet. This means that you will not have to invest so much money at the onstage. If the business fails, you will not lose as much as you would have if you bought the fleet. Again, if you are able to negotiate a good leasing price, you can capitalize on the amount that you make by putting the fleet in a business that will make you twice or thrice your lease fee.

In leasing, however, you will not enjoy the residual value of your fleet once you are done with the business as the fleet does not belong to you. Again, the lease fee is usually fixed at a certain flat rate amount which you will have to raise every month or year.

This is independent of whether your fleet is making money or not. When the business is low, lease payments can really hurt your business.

From the above, it is evident that each mode of funding that you chose will have its own advantages and disadvantages. It is, therefore, necessary to take some time and really evaluate the best option to go with as this will greatly determine whether you will succeed in your business or not. Have an expert run the figures and projections for both methods and see which one will give you the best return. Once you settle on one, try to get the most favorable terms possible.