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The idea of leasing new and used trucks is not new. Granted the concept has been around longer in the car industry, but it has continued to gain popularity within the truck industry. Today, leasing represents a unique financial alternative.

Truck buyer's pay for their vehicle one of three ways: a loan, a lease or cash. If you are one of the 90% of Americans who can't afford to pay cash for your truck, you'll need to decide whether or not you want to lease it or buy it.

Lease it? Buy it? What's the difference? It's easy to confuse the two. That's why it's important to recognize the differences. To help you sort out the specifics, the following is an outline of some of the advantages and disadvantages between buying and leasing.

Leasing is very similar to renting. You pay for the use of a truck that is not actually yours. When the lease is up (usually 36 to 60 months), you don't own the truck, you return it. However, you can elect to purchase the truck at a predetermined price (called the "residual value") rather than return it. The residual value of the truck is set and agreed upon in the original lease documents.

Taking out a loan means that you are financing the truck over a period of time. A loan requires the buyer to make equal monthly payments over a predetermined period of time (usually 36 to 60 months). The monthly payment includes principal and interest and when the loan is paid off, you own the truck.

• Typically the monthly payment is lower since your lease payments are only covering the cost of the trucks depreciation and not going towards the purchase price.
• In many cases, you do not have to make a down payment when leasing. However, by applying a down payment, the monthly lease payment is reduced.
• Unlike car leases, truck leases generally do not have mileage or wear and tear penalties.
• When the lease is up, you can either return the truck to the leasing company or buy the truck back at its residual value.
• Many people who lease trucks return their vehicle to the leasing company at the end of the lease and then enter into a new lease on another truck. This enables them to upgrade more frequently into newer trucks.
• Many times, a consumer can lease a more expensive truck than they could normally afford to finance for the same monthly payment.
• Some companies choose to lease because they find it to their benefit not to have the debt hit their balance sheet. Please seek advice from your accountant regarding this issue.
• Potentially, there may be tax advantages to leasing. Because tax situations vary widely, it is recommended that you consult an accountant to determine whether or not you may realize any potential tax advantages.

• It's possible to spend more in the long run to lease a truck than to finance and own it. If the decision is made to purchase the truck at the end of the lease, the lease can sometimes turn out to be more expensive than if the truck had originally been financed.
• Many lease companies require additional insurance requirements. It varies by individual lease companies but generally higher liability limits and lower deductibles are required. This will increase your insurance premium.
• Normally, once you've entered into a lease contract, you are committed to it for the life of the contract. If you terminate the lease early, you usually have to pay extra money.
• Modifications to a lease truck are by and large forbidden. The truck must be returned to the same specifications and configuration that it was in when it was first leased.
• If the lessee moves from one lease to another without ever buying, it sometimes confines the lessee into a recurring chain of leasing.
• When you lease, you do not build up any equity in the truck. When the lease is up, you don't own the truck.
• It varies among lease companies but there can be situations where credit requirements are tougher for a lease than for financing.

• Monthly payments are applied to the actual purchase of the vehicle. Thus, you are building equity in your truck with each payment. Once the loan is paid off, you own the truck.
• As a business, when you buy you can deduct the depreciation of the truck on your tax return. It is advised that you pursue guidance from your accountant regarding this issue.
• A down payment is not always required. However most buyers do choose to make a down payment in order to reduce their monthly payment.
• Insurance premiums can potentially be lower when you finance a truck as compared to when you lease.
• When you take out a loan and finance the truck, you are buying the truck. Since you actually own the truck (subject to any lien from the financing source) you can make any modifications to the truck that you wish. If you want to put on a different turbocharger or change the ratio of the rear differentials, you are free to do as you please.
• Once your loan is paid off, you own the truck. You no longer have monthly payments to deal with and it's your decision whether or not you want to sell the truck tomorrow or keep it for another 5 years.

• In some cases, when you take out a loan to buy, the monthly payments can potentially be higher for the same truck when compared to a lease payment.
• Financing a truck is a long-term commitment. Anytime you buy a vehicle whether it is a truck or a car, the vehicle typically starts to lose value the minute you drive it off the lot. And as a general rule, it is difficult to trade a truck (or a car for that matter) if you have not made the bulk of your payments. Why? As you make your monthly payments, you are building equity in the vehicle by paying down the principal. Some finance contracts are designed to where you pay more interest per payment in the early years and more principal per payment in the latter years. Consequently, if you try to trade in the early stages of your finance contract there is a high probability that you will not have enough equity in your truck to make it a favorable deal for you.

What's right for you? Obviously there are many questions that you will need to answer. After all, it all depends on you and your business. You'll need to decide what makes sense for your situation.