Finance, Lease, or Cash for work trucks?

acefuture

acefuture

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There's probably quite a few of you guys who owners/operators of trades businesses on here so figure you guys are the right people to ask. How are you guys going about getting your new work trucks? Are you financing them through your bank? Are you financing them through the dealership? Are you financing them through a credit union? Are you leasing them and then trading in for a new one every couple years? Or just paying for them cash and getting all the life you can out of them?
 
rivermobster said:
I'm thinking you tax guy would advise you to lease?
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All 3 are sort of options. It's a new plumbing business I'm helping get off the ground so there isn't established revenue/forecast/profits to make an educated decision on tax implications. So wondering what others are doing to see if there's some sort of trend that makes sense.
 
acefuture said:
All 3 are sort of options. It's a new plumbing business I'm helping get off the ground so there isn't established revenue/forecast/profits to make an educated decision on tax implications. So wondering what others are doing to see if there's some sort of trend that makes sense.
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Service or new construction? If its service id be looking new as miles will add up quick, if construction id buy used as its used to and from job site. Rates will be lower on a new purchase. truth be told in my experience, if he is successful it really does not matter what he does, a truck payment will be a drop in the bucket. Also he can use the truck/s to offset income subject to higher taxes year 1 (179) and depreciate remainder out after that giving the company a jump start.
 
Grease Monkey said:
Tax guy would say start an llc for the fleet, put the van loans in the llc, lease the vans to the company.
Own nothing.

I paid cash for most of my fleet.
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Interesting. I had considered doing something similar, but my hang up was rates due to no history of the new LLC. As a cosigner it should work out though.

raspadoo said:
Service or new construction? If its service id be looking new as miles will add up quick, if construction id buy used as its used to and from job site. Rates will be lower on a new purchase. truth be told in my experience, if he is successful it really does not matter what he does, a truck payment will be a drop in the bucket. Also he can use the truck/s to offset income subject to higher taxes year 1 (179) and depreciate remainder out after that giving the company a jump start.
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Both. He is already operating as a sole prop and does decent business with both service and new construction. Has way more potential and just needs the foundation, which is where I come in. 1 truck for him is no problem, but looking at options for multiple trucks to bring on employees. So trying to wrap my head around the best direction. Year 1 will run near break even so the 179 deduction won't be necessary, but it will be applicable year two, which it will still be available, so purchase over lease was the main game plan. But lease isn't out of the picture since year 1 we won't need the deduction.
 
acefuture said:
Interesting. I had considered doing something similar, but my hang up was rates due to no history of the new LLC. As a cosigner it should work out though.


Both. He is already operating as a sole prop and does decent business with both service and new construction. Has way more potential and just needs the foundation, which is where I come in. 1 truck for him is no problem, but looking at options for multiple trucks to bring on employees. So trying to wrap my head around the best direction. Year 1 will run near break even so the 179 deduction won't be necessary, but it will be applicable year two, which it will still be available, so purchase over lease was the main game plan. But lease isn't out of the picture since year 1 we won't need the deduction.
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Is he looking to bring in multiple new trucks/guys at once? If he can swing one truck by himself, why not start there?
 
Grease Monkey said:
Tax guy would say start an llc for the fleet, put the van loans in the llc, lease the vans to the company.
Own nothing.

I paid cash for most of my fleet.
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That is how we do it, LLC pays cash for the trucks then leases to the Company. On years where things are tight the leases might not get paid. The leases only get paid when we need new trucks.
 
Kraut_n_Rice said:
Is he looking to bring in multiple new trucks/guys at once? If he can swing one truck by himself, why not start there?
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One truck immediately. Two more by the end of the year
Grease Monkey said:
Your next question will be insurance. Figure 1 mil minimum liability ins per van. Sweet James aint no joke and 1 mil doesn't go far in todays litigious world.
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Yep, my insurance team is already on it. Should have a 1mil liability with a 2mil aggregate on each truck, and an umbrella on the company. Not playing games with insurance haha.
 
depends on what interest rate you could get the loans at vs how much cash you have on hand.

Section 179 bonus depreciation is a great thing to take advantage of in your scenario, but you need to be making money to benefit from it. It is still one of those spend to save scenarios, but better to send your money towards a new business vehicle vs taxes to help fund somali daycare centers
 
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