Should You Buy a Fleet Vehicle for Your Business?

Fleet Vehicle

One of the biggest choices business owners in the transportation industry face is whether to buy or lease their fleet vehicles. It’s a tough decision with much at stake, affecting everything from your available cash flow to your ongoing maintenance routines. When considering fleet management costs, is buying your own fleet vehicles a wise investment over a fleet lease vehicle, or is it a potential money pit?

This article will guide you through the benefits and drawbacks of buying a fleet vehicle over leasing one to help you make the right choice.

The Pros of Buying a Fleet Vehicle

First, let’s look at the major benefits of purchasing your fleet vehicles outright.

Long-Term Savings

When you buy a fleet vehicle, you won’t have monthly lease payments hanging over your head. Plus, you won’t have to worry about mileage fees or penalties for wear and tear. Additionally, you’ll usually pay lower insurance costs and have the freedom to decide when to upgrade your vehicles. All these factors can reduce your overall spending over time compared to leasing.

Assets on Your Balance Sheet

Owning your fleet vehicles lets you list them as assets on your balance sheet. This can boost your company’s value, and you can always sell the vehicles to get quick cash if necessary. Additionally, you can use the vehicles as collateral when you need to borrow money.

Tax Benefits

Buying your fleet vehicles also comes with tax benefits. For starters, you can deduct the vehicle’s depreciation from your taxable income each year, which reduces your taxes.

On top of that, you can get a Section 179 tax deduction. This lets you write off the cost of the vehicle right away rather than waiting for years to get full tax benefits. If you finance your vehicles, you can also deduct the interest.

Greater Control

Last but not least, buying gives you greater control over your fleet. You get to set your own rules about how the vehicles are used. Also, you have full say over maintenance—when it happens and who does it.

When you own your fleet vehicles, you can make them truly yours. This means you can add your company colors, logos, and other custom messaging that aligns with your brand.

The Cons of Buying a Fleet Vehicle

Before you jump in, make sure to consider the cons of buying a fleet vehicle, which we explore next.

The Challenge of Upfront Costs

When you buy a fleet vehicle, you’re looking at a large initial payment. This can be a tremendous obstacle, especially if your operation is small or just starting out. For many businesses, having enough money on hand is a common challenge. If cash flow is tight, buying a fleet vehicle could put a strain on your budget.

The Burden of Maintenance Costs

Owning a fleet vehicle means you’re responsible for all its upkeep. If something breaks or needs to be replaced, that’s on you. Failing to maintain your vehicles can lead to high repair costs down the line.

For example, delaying oil changes a little might seem like a small thing, but it can lead to engine issues that cost much more to fix later. If you’re unprepared for this commitment, the ongoing expense can become a major issue.

Just as problematic is unexpected maintenance that a leasing agreement would have taken care of. Now, you’re burdened with an expensive repair you weren’t expecting. When you buy your fleet vehicles, you need to budget for these possibilities in advance.

The Problem of Vehicle Depreciation

As soon as a vehicle is put to work, it starts losing its value. This is called depreciation. The more you use a vehicle, the less you’ll get back when you sell it. If your operation demands that your vehicles are out and about all day, every day, they’ll lose value fast. This is a bigger problem if you like to keep your fleet updated with newer models, as you’ll get less money for your old vehicles each time you sell them.

Risk of Falling Behind on Technology

The tech in vehicles is always changing. New safety features, better fuel efficiency, and advanced navigation systems are always coming out. If you buy a fleet vehicle, you’re stuck with the tech it has until you can afford to upgrade. So, if a new technology comes out that could really help your team—like a system that makes your vehicles more fuel-efficient—you might find yourself wishing you could upgrade sooner than you’d planned.

By understanding these challenges, you’ll be better prepared to decide whether buying a fleet vehicle rather than leasing is the right move for you and your team.

Should You Buy a Used Fleet Vehicle?

When deciding should you buy a used fleet vehicle over a new one, think carefully about your business needs. The choice between a new and used fleet vehicle will affect your fleet management costs, maintenance plans, and overall fleet efficiency.

The lower initial cost is one of the most appealing aspects of buying a used fleet vehicle over a new one. Vehicles depreciate quickly during their first few years, meaning you could get a reliable vehicle for less if you buy a used one.

Most used fleet vehicles come with a detailed maintenance history, and companies usually follow stringent maintenance protocols, so these vehicles are typically reliable. However, used fleet vehicles can show signs of wear and tear from high mileage or constant use.

If you buy a used fleet vehicle, conduct a thorough vehicle inspection and carefully review the maintenance history. In a business where time equals money, the last thing you need is a vehicle that will spend more time in the repair shop than on the road.

Next Steps

So, what’s your next move?

First, assess your business needs carefully. How much driving will your fleet do? What’s the budget? Can you afford the initial outlay of buying a fleet vehicle?

Second, consult financial advisors to understand the tax benefits and liabilities for both options. Negotiate terms with vendors to get the best deal, whether you’re buying or leasing.

Finally, invest in top-notch fleet management software to ensure ongoing effective fleet operations.

Frequently Asked Questions

What is considered a fleet vehicle?
Fleet vehicles are owned by companies and used for various business activities. They’re not personal cars but serve a work-related purpose like helping with sales calls or logistics.
How do you maintain a fleet vehicle?
Regularly check and service the engine, brakes, tires, and other essential components. Follow the manufacturer’s maintenance schedule and use fleet management software for reminders and tracking.
What is the difference between commercial and fleet vehicles?
Commercial vehicles are used for business purposes but can be owned by individuals or companies. Fleet vehicles are a group of two or more vehicles owned or leased by a business or organization.
Written by:
Richard has more than 20 years of experience in business operations, computer science and full-stack development roles. A graduate in Computer Science and former IT support manager at Samsung, Richard has taught coding courses and developed software for both private businesses and state organisations. A prolific author in B2B and B2C tech, Richard’s work has been published on sites such as TechRadar Pro, ITProPortal and Tom’s Guide.