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Should You Buy Or Lease a Truck for Your Hotshot Business?

In trucking, the term hotshot commonly refers to either the truck or the freight – often both. In the former sense, it is normally a Class 3-5 truck used in combination with a variety of trailers to run for-hire freight, whether for a single customer or less-than-truckload, though there are exceptions.

A 40-ft gooseneck flatbed trailer is the maximum length you can use and it is the most versatile. Make sure you have tarps and tie-downs to protect and secure loads. There are operators who prefer a box-type trailer to protect loads. If you intend to specialize in vehicle transport, a three-vehicle V-trailer would be a good investment. Note, an occasional automobile can be secured on a flatbed or even inside a box trailer.

Pros and Cons of Buying a Truck for Your Hotshot Business

A person who buys a truck for hotshot trucking has the assurances of ownership. Right from the time of the acquisition, the truck is considered an asset that may be sold at any time. With each month’s payment, the vehicle gains equity. And, when the truck has been paid off, the driver may drive it indefinitely with no monthly payment.

The truck may also be used as a valuable trade in when the driver opts to acquire a new commercial vehicle. A good number of hotshot truck drivers notice that insurance rates for commercial truck loans are often less than that for truck leases, which is another savings benefit.

In addition, although commercial truck loan rules tend to vary among the types of commercial vehicles, there are some general financing details to consider. If you have been operating your business for a while and can exhibit and prove good cash flows, you are acquiring a newer truck, and you have reasonable credit, many times a down payment will not be required.

But as additional risk factors increase, the amount of down payment needed for the semi truck loan may go up. However, industry trend has shown that serious, career truck drivers experience many advantages from owning their own vehicles. Ownership of a hotshot truck is much like ownership of a home and the long term equity and freedom outweigh the short term benefits that may be experienced through leasing.

Pros and Cons Leasing a Truck for Your Hotshot Business

Leasing a hotshot truck is more or less like paying monthly rent. Note that the money that is paid on a monthly basis is for the use of commercial vehicle, but no ownership equity is ever realized. In addition, the leased vehicle remains the property of the company issuing the lease and they will continue to profit from your use of the vehicle. Also have it in mind that rules and restrictions may be assigned to the lease, allowing for less control on behalf of the driver.

Leases tend to be structured for a set time period, starting from one to three years and payments are required, without fail, for the complete term of the contract. If, at any point, you decide that you are no longer interested in continuing use of the semi truck, and early termination fee will be assessed and the security deposit will be forfeited.

However, the benefit of leasing is having increased flexibility and less commitment. Leasing your hotshot truck requires less upfront cash and monthly lease payments are usually less than finance payments. Additionally, once the lease period is over, the lessee can choose to turn in the vehicle.

Drivers may be able to claim tax deductions that are available for the use of leased vehicles as well. If you are not confident that you will be driving the commercial vehicle for a minimum of three years, leasing may be the best option for you.

Buying a Truck vs. Leasing a Truck for Your Hotshot Business, Which one is best?

Ideally, instead of buying a Truck for your hotshot business, you could lease one just as many business owners are doing today. However, here are top benefits of leasing a truck for your hotshot business instead of buying a new one, along with some other helpful information.

  1. More Affordable and Better Profits for Your Business

One of the primary reasons you should Lease a truck for your hotshot business is that it doesn’t require a huge capital expenditure. Unlike buying a vehicle, leasing doesn’t include some hidden costs, such as taxes, towing, overhead and other expenses. Aside having to make large up-front costs, truck owners are also expected to cover finance charges and pay a sales tax.

By leasing a truck for your hotshot business, you can obtain better profits for your business since your monthly payments are lower. Therefore, you get to keep more money in your company’s bank account.

  1. No Depreciation Costs

Also note that when your leased truck decreases in value owing to depreciation, it won’t affect you. It simply means that you don’t have to worry about depreciation costs, which is a problem when buying a new truck. Leasing doesn’t reduce the net worth of your business, and it doesn’t appear on your balance sheet.

  1. More Flexibility

A good number of leasing companies in the United States don’t require a down payment and this also makes leasing more flexible than buying a truck. Once your lease period has ended, you return your leased vehicle. This also gives you more flexibility.

What’s more, the terms of a lease involve a fixed, consistent payment, which can make your finances more flexible as it frees up capital. This tends to be quite helpful when you have to make business investments or pay for emergency repairs for your business.

  1. 24/7 Emergency Roadside Breakdown Assistance

You will have peace of mind in knowing you’ll be rescued when your truck breaks down is a huge advantage of leasing. Unlike truck ownership, you can let your leasing company take care of vehicle breakdowns when you buy a full-service lease.

Note that when your truck breaks down, you can contact an experienced mechanic who’s on standby to handle whatever you need done. These specialists have everything needed for handling flat tires, towing and other types of problems.

  1. Less Maintenance and Repair Costs

Another advantage of leasing is a reduction in repair and maintenance costs. Have it in mind that with a full-service lease, repairs and maintenance expenses are covered, such as oil changes, tires and routine inspections. But when you own a truck, you’re responsible for repairs and maintenance.

  1. Relieves You of Issues Linked with Vehicle Ownership

When you lease a truck for your business, you’re relieved of the normal troubles and hassles you would more or less experience with vehicle ownership. For example, you don’t have to deal with possible compliance problems or fees linked with replacing drivers or costs for training drivers. Another problem with owning your own company truck is having drivers leave your company to work for businesses that have more advanced equipment.

Conclusion

Although the choice you make will depend on your financial capabilities, but leasing still remains the best option for new entrants into the trucking business. By signing a lease, you avoid big monthly loans. It also gives you a way to exit the hotshotting business if it doesn’t work out for you. When leasing, it is best to get a hotshot truck with a low depreciation rate.

Be wary of some dealers who may be devious enough to give you a dishonestly low residual value. Remember: the lower the residual value, the higher the lease payments. The reverse is also true. Also, upon entering a lease deal, always keep an eye for any clauses and other “surprise” or hidden costs.