For many years I was convinced that leasing a Tow Truck, Wrecker or Carrier was an expensive financing method. However, with creative lease packages designed to fit the needs of customers, there are many reasons that leases have become the preferred financing alternative.
Put More Profit on the Bottom Line
If you simply compare a monthly lease payment to the sum of depreciation plus interest on a conventional loan, you will see that the lower overall monthly expenses will result in a higher profit.
Preserves Cash
In business, cash is king, and we must all protect our available cash flow. Leases eliminate the need for a common 20% down payment required on many conventional loans. Most leases only require a first and last month lease payment.
Better Balance Sheet
An operating lease is a monthly expense, however it does not show on the company's balance sheet as a long term debt. Therefore, your business appears to have a higher net worth because of the lack of debt.
Choice
You have a a choice of what to do with the truck. At the end of most leases, you have a "residual". The residual is the amount for which you can buy the truck from the lease company. Residuals range from $1.00 to 50% of the original purchase. You have the choice of whether to buy the truck or let the lease company dispose of it.
There are many reasons why this option is valuable. One example is the California "Freeway Service Patrol" contracts. At the end of a 3 year lease, and where the towing company has just leased another 10 trucks for the renewed contract; the option to return the 3 year old trucks to the lease company instead of buying 10 used trucks (and then finding buyers for these 10 used trucks over the next several months) can be a huge relief on both cash flow and energy expended.
Footnote: FSP contracts call for trucks to be no more than 2 model years old, and no more than 50,000 miles. Therefore, trucks used on one 3 year contract will not qualify for subsequent contracts
In summary, for all of the reasons above, I now highly recommend a Tow Truck Lease Package groomed to fit your specific needs.
Gary Coe
P.S. Competition Wheel Lift Offers Top of the Line Trucks, Wreckers and Car Carriers from Chevron, American Eagle and Century for Purchase or Lease.
