“How Much Are Tow Truck Leasing Rates?” written by Mike Marko.
In need of a tow truck for your business… that won’t hurt your cash flow?
Then tow truck leasing might just be what you need.
Leasing can prove to be the more beneficial option for your business in the long-run. Obtaining a new tow truck is not a cheap task, and can undoubtedly put a dent in the bank. And this does not factor in repairs and upgrades that you may find yourself needing in the future.
If you are looking to avoid dipping your hand too much in your wallet while enjoying a new tow truck, then tow truck leasing is the best option for you.
In this article, we will discuss how tow truck leasing works and the different factors that may affect the leasing rates.
Tow Truck Leasing for Businesses with Good Credit and Startups
Owning several tow trucks does not increase your business’ revenue.
Rather, it’s their use and overall productivity that generates the profit for your company.
This begs the question: Why use up half of the money in your bank to buy a new tow truck when you can just lease and achieve the same result?
Many businesses that deal with tow trucks are only now beginning to realize the benefits of tow truck leasing.
Those who have not jumped the bandwagon have not done so for one reason – they do not know what it is.
So, what exactly is tow truck leasing?
What Is Tow Truck Leasing?
Tow truck leasing is a type of leasing and financial arrangement.
A person, business owner or a company pays another entity accordingly to be able to use a tow truck for a specific period of time. In this contractual arrangement, the lessee pays the lessor an amount of money subject to the terms agreed to acquire temporary rights to use the tow truck.
Tow Truck Leasing for Startups and Businesses with Good Credit
If you are merely starting your operations, you may think that you have minimal chances of getting a tow truck leasing given your limited business history.
However, this can be the least of your worries. Leasing a tow truck is still achievable, regardless of your period of operation or average credit score.
Businesses With Good Credit
If you’re a business with an average or “good” credit, you have nothing to fret about.
When it comes to tow truck leasing, while a perfect credit score can help your application move faster, it does not have to necessarily be the case.
The conditions that can affect your application for tow truck leasing are:
- Your business must be operating for at least 2 years.
- Although credit scores are not a problem, it is an easier process when your credit score is over 625.
- Be mindful of the age of the truck you plan to lease. It would be best if the tow truck isn’t really old.
Startup businesses often face the hardest time when it comes to leasing a tow truck.
However, if you’re able to provide a 650+ credit score and are looking for a fairly new tow truck, then applying for a lease will be easier.
You must also consider the amount of money your startup is willing to shell out for the lease. Lenders often require startups to provide at least 10% of the money as down payment with proof of money left over to pay the lease.
Benefits of Buying Used Tow Trucks Through Leasing
Leasing is a good option for business owners who want to save their working capital for other unexpected expenses of their business. Acquiring a used truck through leasing, however, is another option that can be healthy for your business.
There are several benefits that you can receive if you decide to do the latter. Examples of these benefits are:
1. A Lot of Options to Choose From
Leasing tow trucks allows you the flexibility to choose from a wide range of options. There are more than three times as many pre-owned trucks compared to new ones. This allows you access to lots of choices when you buy pre-owned or used tow trucks.
2. You Avoid Rapid Depreciation
Buying a tow truck is costly.
You would also have to consider that, in 2-3 years, tow trucks lose half of the value they had when they were first acquired. In short, when you buy a tow truck, you will only be able to use its full value in its first year.
Leasing can help you avoid that mistake.
3. What to Look for When Buying Used Tow Trucks When Leasing
To help you get the most out of buying used tow trucks through tow truck leasing, here are important tips to keep in mind:
- Look for a tow truck that is only a few years old. Trucks last a long time so having one that is only a few years old can be a good investment in the long run.
- Know the towing capacity of the tow truck. This is important especially if you’ll be using the truck to tow a trailer.
- Have a pre-purchase inspection done by a professional mechanic even when the tow truck has a high reliability rating. You have to make sure that you check any signs of extreme wear and past uses.
Benefits of Used Tow Truck Leasing from Dealers
One not commonly known fact about tow truck leasing is that used tow trucks can also be leased from dealers. This is another option that can be considered when you are looking to not spend as much money on leasing a fairly new truck.
In addition to cost, here are the benefits to leasing used tow trucks:
- Used tow truck leasing requires lower monthly expenses, which means you can easily increase your profit margin.
- Leasing usually requires you to pay only for the first and last month of use as your down payment. This method can help you in preserving more cash for your business.
- Leasing is a monthly expense but is not considered as a long-term debt. This can help you have a better balance sheet for your business.
- You’ll always have a choice on what you plan to do to the truck at the end of your contract. You can either buy the truck according to its residual value or let the dealer dispose of it.
Tow Truck Leasing Rates for Your Business
Payments for tow truck leasing can vary. Rates for your desired tow truck lease will depend on various factors.
This guide for the different leasing rates can help you get a better idea of the payment scheme.
Tow Truck Lease Rates
Here’s an example of a tow truck leasing scenario (for reference only):
Consider a $40, 000 tow truck with two options for a 5-year term contract: return at the end of the lease or own it after paying almost $4,000.
How much will you be paying monthly if your credit is considered?
- For a very low-risk credit, the amount you’ll pay monthly until the fifth year will be around $76.
- If you have a moderately risky credit, your monthly payment is around $100 until the fifth year.
- High-risk credit profiles monthly payment will be around $147 until the fifth year.
Factors Affecting Tow Truck Leasing Costs
Naturally, when your credit score is lower, your payment rates will go higher. There is also the factor of the length of time you’ve been in the business. The less time you are in the business (new or startup business), it’s highly likely that your rates will be higher.
Here are other factors that can also affect the rates or costs of your lease:
- Age of the truck
- Your chosen financier (is it a tow truck dealer, a bank or another financier?)
- Size of the tow truck
- Leasing duration
Final Thoughts on Tow Truck Leasing for Businesses with Good Credit and Startups
In this article, we discussed what tow truck leasing is and the benefits of acquiring it over a loan. Tow truck leasing is a financial contractual arrangement that helps a person use a truck in exchange for payments to be made depending on the agreed terms.
We also talked about the benefits leasing provides as compared to a loan. This is particularly important for startup businesses, as well as businesses with an average credit score.
After discussing the benefits of tow truck leasing, we further expanded on the different factors that affect the payment rates for businesses.
If you need more information about tow truck leasing, please call Trust Capital USA at (866) 458-4777.
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