Lease vs. Buy in Small Business

The “lease vs buy” question is age old debate which turns up many results with varying opinions when searching online.

Small business owners face this dilemma regularly and in multiple areas of their business. Our small manufacturing services business recently went through this very issue after our 26′ box truck finally kicked the bucket. We were fortunate enough to receive a modest insurance check but then faced the decision of distributing this cash, reinvesting elsewhere in the business, or using it to purchase another truck (which we needed).

Our regular vendor for truck rentals sent over a few quotes on leasing options including the month-to-month variety.

At the end of the day, it made more financial sense for us to take the proceeds and reinvest in another used box truck in the $25,000 neighborhood. The lease costs would run that much per year and our maintenance costs are fairly low (thankfully we have handy drivers). The lease company offers all sorts of bells and whistles with roadside assistance, full maintenance plans, rentals when you need them, etc.

Without being in the business of regular trucking (our need is mainly for pickup and delivery of customer product to service that week), it seemed hard to justify these costs.

I could envision a scenario where leasing would seem much more favorable. If our company was putting up tens or hundreds of thousands of miles per year for instance. In fact, another one of our businesses is in the daily short-haul delivery market and we use this exact strategy. Leasing or renting is a great option for us given the 300-500 daily miles we’re putting on each truck. Roadside assistance is particularly handy when a driver has an issue and he’s 300 miles away from home.

This debate will never have a clear cut perfect answer. It will always be situation dependent. Chime in if you have an example of a good lease vs. buy story or situation.