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Its getting time to consider a business vehicle perchase/lease. Would like to discover what would be best in general. To open up a can of worms; I thought I would ask the wealth of experience available here some questions.
1. How does a work vehicle affect Image and can it be quantfied in dollars and cents?
2. How many contractors out there lease vehicles and what are the advantages vs the pitfalls.
3. If usage makes a difference for lease vs buying used....what would be the best for a small contractor doing 10 to 15 k total miles a year (no major city work).

I appreciate your responses. Thanks
Lease is 100% write off
Originally Posted by TheGreatSparkalini

1. How does a work vehicle affect Image and can it be quantfied in dollars and cents?


I believe a clean and reliable truck will help convince a customer that you do clean and reliable work. I don't know how I would quantify it, but I have been in discussions where customers have told me they would never hire a guy who would drive a truck and keep his tools "like that". I don't believe fancy new trucks are required, but they should be clean and organized.

And they absolutely, positively, have to get you to the job on time, every time.

The opposite is also true. We often work alongside a plumbing contractor who drives a Mercedes. That car comes up in conversation far to often to believe that no one notices it and thinks they are being overcharged. He bought the car used for not much more than the cost of a good pickup but it doesn't matter. The very sight of it on the job irritates people.

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2. How many contractors out there lease vehicles and what are the advantages vs the pitfalls.


I buy my trucks a couple of years old and run them until it costs more to fix them than the payments on a new one, or they deteriorate to the point that they are a visual liability. I typically buy a 2 or 3 year old truck with less than 50K miles on it for about 1/2 what the truck would cost new. Given that we run 1 ton pickups with utility bodies and the body alone is about $8K I get my best value that way. I've been trading them at about 150K - 200K miles and it's nice to see that American trucks are lasting that long these days.

I have a couple of problems with lease vehicles. The first is that they are nearly always new and depreciation eats you alive. The second is that you are guaranteed to have a truck payment forever and nothing to show for it at the end. Leases are set up to benefit the leasing company, not you.

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3. If usage makes a difference for lease vs buying used....what would be the best for a small contractor doing 10 to 15 k total miles a year (no major city work).


By California standards you don't drive much and your annual mileage would be within the range acceptable to most lease companies. The problem however, is that the truck has to look like brand new when you turn it in and if you're working out of it, it won't. Look for hefty charges for dings and dents at the end of the lease period.

The tax writeoff thing can be useful, but on a purchased truck you can write off the entire purchase the first year - I don't think you can do that with a lease. Talk to your tax guy - there are limits to how much you can write off (with my used trucks it has been 100%) the limit changes and it may not even be possible any more, but that is how I have been doing it.

At 10K miles per year, you might consider a sub $10K hi mile (100K?) van (I assume you use vans in Maine) to get you the best bang for your buck. Buy it for $10K, write it all off the first year, put 75K miles on it in 5 years and junk it for $1000 at the end.

You'll be paying something like $7K (depends on your tax structure) for 5 years and 50-75K miles. That's less than the depreciation on a new truck the day you drive it off the lot.

Everything stevecheyenne said, only I buy new trucks and sell them for $1000 (or less) at 200K miles to my employees.
track leasing is the best option if you can do it..best of both worlds...
What is track leasing?
I googled it and found:

1) leasing of a RR track
2) leasing of a race track
3) fast track leasing for Ryder trucks (fleets)
trac=terminal rental adjustment clause
Trac Leasing allows the tax advantages of a lease, with the benefits of a purchase.

Quick info on trac leasing

Whenever we can use trac leasing (not all manufacturers do it - Sprinters didn't a while back, don't know about now) We do a $1 buyout. $0 down, truck pays for itself from day 1.
This is an interesting find:

An open-end lease usually has a short minimum term (one year), then continues on a month-to-month basis until the lessee terminates. Most open-end leases contain what is known as a TRAC clause (Terminal Rental Adjustment Clause). The TRAC clause provides that when the vehicle is turned in and sold by the lessor, if the proceeds from the sale exceed a value determined at lease inception, the lessee gets the excess. If the proceeds are less, the lessee must pay the difference. Most open-end leases do not contain mileage or wear-and-tear penalties, and often contain a “step-down” payment schedule, wherein payments decline annually.

Found here:http://www.fleet-central.com/af/t_remarketing.cfm?fromsite=af&action=articles_pick&storyID=1071&remarketing=1
Mahlere, this sounds like it might be the way to go. How long do you typically keep the leases going after the one year minimum? How do the lease payments compare to loan payments to purchase the same truck?

And how do you settle on what the value of the truck will be at various points along the life of the lease?
steve,

we typically do a 4 yr lease. $0 down, $1 buyout. Lease payments for a ford or chevy will be about $450-$500/month. At the end of 4 yrs, we give them $1 more, they give us the title. Same as if we purchased the truck traditionally. Then you keep it as long as you want to.

the only times we won't trac lease are -

if the manufacturer offers 0% financing, or
the manufacturer doesn't offer trac leasing (sprinters didn't have the option when we bought)

but in terms of putting you in a new truck...look into it.
Originally Posted by mahlere
in terms of putting you in a new truck...look into it.


That's roughly equal to the 4 year payment on a $20K loan at 8% without a down payment. Not a bad deal and I will look in to it - thanks!

Now about that Sprinter. With gas rocking in at $3.37 here today I need to look at trucks that get better mileage without spending the $6K or so more that the diesels cost. What I really want is one of the little Mitsubishi 1 ton mini trucks with the 4cyl. diesels that I saw all over Ireland a few years ago. They put extended frames on them and stout springs - stout enough to haul a mini excavator in the bed - but they don't sell them here.

What they do sell here are Sprinters and I hear the mileage is pretty good. We've never used vans but I suppose we could get used to them. I did see one the other day that had been fitted with a utility body - might be a good way to go.

So - how do they hold up? How's the mileage?
I see the merit in the lease with the very low buyout. Maybe one day when I can afford the new vehicles wink

For now, careful selection of a used van works for me. And you don't always have to pay extra for diesel power. grin
ok...

sprinters are great trucks with a few downsides...

an unhappy employees can blow a motor in a heartbeat. look into the transmission and shifter.

there are not a lot of qualified mechanics to work on sprinters. make sure you have a few available in your area, or you could be looking at serious downtime should something go wrong.

that being said, we have an '05 with 70,000 miles on it. No major problems, 7 oil changes and 1 loose hose clamp. I can live with that.

u2..that's the point of the lease, it doesn't cost you a dime. It pays for itself from day 1. $1000 or so for taxes,etc at inception, $1 at the end. The rest of the time, it's making the money needed to pay for it. Below is not directed at you alone, it's a generalized statement, you just happened to be the catalyst.

electricmanscott started a thread in another forum. I learned the theory from a plumber about 10 yrs ago. Very simply put..."the customer pays for everything"

there is no reason you can't afford a "new truck" right now. Unless you are not charging enough.

EC's do tend to look at items (trucks, equipment, material) and think...I'm not paying that much...I can't afford that...whatever.

We forget that all the items above are expenses, expenses that are Costs of Goods Sold (or COGS for those that know what a P&L is:))

These items are either direct expenses (material) or overhead expenses (vehicles, equipment, etc)

If you are a full time EC, there is no reason on earth you, even as a one man shop, can not afford to put a new van on the road. Even at $600/month. That is $30/day for the average 20 day working month. That is 2 dimmers a day extra (after deducting all costs) that is nothing. $30/day.

$30/day is $3.75/hr. for you T&M guys, raise your hourly rate from $50/hr to $53.75 an hour. The $600 is deductable, so there aren't really any extra taxes. But charge $54.25/hr just to cover any extra taxes.

If you can not figure out how to make $30/day extra...go work for someone else who can, and learn from them.

We are not talking about a 1 man shop renting a shop for $2000/month in addition to a van. We are talking about a van that will make you money.
again, u2, sorry, i am not speaking directly at/to you.
Do you happen to know what your Sprinter weighs when it's fully loaded? What kind of mileage are you getting?

And what am I looking for as far as the transmission and the shifter?
Originally Posted by mahlere

u2..that's the point of the lease, it doesn't cost you a dime. It pays for itself from day 1. $1000 or so for taxes,etc at inception, $1 at the end....

...If you are a full time EC, there is no reason on earth you, even as a one man shop, can not afford to put a new van on the road. Even at $600/month. That is $30/day for the average 20 day working month. That is 2 dimmers a day extra (after deducting all costs) that is nothing. $30/day.


I fully agree on the lease/expense aspect smile I did check into a few lease possibilities and the end of term buyouts were not $1. The best that I was offered was 10%. Maybe the $1 deal is something I needed to shop harder for. With a much higher buyout, I worry that at the end of the lease I may be forced to either pay lease penalties for condition or overmileage, or buyout a van I don't even want for more than market value.

You bring a good perspective to the table. I know I'm intimidated by a financial commitment like that, whereas I have bought used sub-$10k personal vehicles every few years usually out of rapidly changing needs. Whether I thought I could afford them or not, things still seemed to work out.

The lease expense divvied out to the hour certainly is manageable - no doubt about it. I'm still pretty new at this (coming up on one year) and getting those 20 full days/month of billable hours is a dream.

I'm glad this forum exists. I know I'm better off for the experiences and information I read here. cool
Originally Posted by stevecheyenne
Do you happen to know what your Sprinter weighs when it's fully loaded? What kind of mileage are you getting?

And what am I looking for as far as the transmission and the shifter?


The Sprinter has changed a bunch for 2007... different engines, higher GVWR. Might be tough to get real-world experience on them right now.
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