For many years I was convinced that leasing a Tow Truck, Wrecker or Carrier was an expensive financing method. However, with creative Tow Truck Lease packages designed to fit the needs of customers, there are many reasons that leases have become the preferred financing alternative for competitive towing and recovery businesses.
More Profit on the Bottom Line If you 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 for your towing business.
Preserves Cash In business, cash is king, and we must all protect our available cash flow. Leasing options eliminate the need for a common 20% down payment required on many conventional tow truck and recovery vehicle 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 choice on what to do with the tow truck. At the end of most leases, you have a "residual". The residual is the amount for which you can buy the tow 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 lease package groomed to fit your specific needs.
P.S. We offer the best in Century, Holmes, Challenger and Champion Tow Trucks, Wreckers and Car Carriers for lease or to buy.