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"Lease a semi-truck? How does that work?"
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It’s no wonder that in a market where a new commercial semi-truck can cost as much as $150,000 why many independent truckers and trucking businesses are turning to commercial truck leases to simplify fleet management. And here’s the thing—they’re actually able to use these leased semis to turn a profit!
Leasing a semi-truck means that you make monthly payments for the use of a commercial semi-truck until the agreement ends. From that point, you can either buy the truck, give it back, upgrade to a different truck, or renegotiate a new lease term to keep on trucking.
In this guide, we’re going to discuss the specifics of commercial truck leasing—from loan terms to pros and cons—and explore which type of lease will best suit your needs and scenario.
Leasing versus buying commercial vehicles can help reduce much of the upfront cost of using and owning said equipment—especially for those with less-than-perfect credit. For this reason, many companies across the trucking industry opt to lease their commercial trucks to avoid various costs of ownership.
Before we get into how to lease a semi-truck, let’s take a look at why you may want to do so. Here are some of the advantages of a commercial truck lease.
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Leasing a semi-truck gets you the equipment you need without a steep down payment. Why? Because there is less risk for the company that owns the commercial truck. The commercial leasing company still owns the piece of equipment, so it’s not technically a financial loan. With that being said, you may be able to enjoy a lower monthly cost (depending on the leasing options) than a loan because you aren’t obligated to buy anything at the end (unless you opt for a dollar-buyout, which we'll get into later).
Commercial semi-truck leasing is for more than just start-up companies and independent truckers. Actually, every size company in the trucking industry utilizes leases. Even larger trucking companies often lease entire fleets.
"Why would a larger trucking company lease semi-trucks? Don't they have the budget to just buy them outright?"
Owning equipment may not always be all it's cracked up to be—and often comes with significant costs. Leases can act as a smart way to defer high purchasing costs or costs to fund other important operational expenses while the lease is being paid.
For example, instead of making a fleet an outright purchase, a trucking company might lease the fleet to manage the price of ownership (registration, logistics, down payments, and the like) to pay their drivers or expand their operations.
Also, because a commercial truck is a depreciating asset, many companies may determine that there isn’t much long-term advantage to owning said equipment. Such companies can arrange truck loan terms that align with vehicle upgrade schedules and avoid the logistics of offloading older commercial trucks.
Opting to lease commercial vehicles can also free up additional credit sources for other business-related expenses usually allocated for new vehicles and upgrades. In fact, leasing can usually be used as a tax write-off—acting as a business expense, though you should always consult a tax professional.
It’s not uncommon for businesses to keep their fleets fully modernized with leases. Fleet owners can simply swap out older trucks for newer models when the lease term has expired.
Also, depending on the lease agreement, most leases even offer maintenance repairs. Leasing companies tend to be very efficient about administering repairs—after all, it’s in their best interest to get you back on the road quickly so that you can continue to make your monthly lease payment on time.
Leasing a semi-truck can seem like an answer to the prayers of many would-be owner-operators with less-than-awesome credit scores, limited down-payment budgets, and even limited career aspirations in the industry. While these are great perks, some drivers have found themselves up against the restrictions that come with driving someone else's truck.
Depending on the commercial truck lease agreement, some drivers may find themselves struggling to make enough to pay their monthly lease payment on top of the rest of their expenses. Many of these drivers may be less experienced, have fewer certifications, and thus less capable to make the arrangement make financial sense. Unless they're enrolled in a lease-to-own agreement or some other equipment financing type of lease, because they don't own the truck they're driving, their payments will never stop.
Because drivers are driving someone else's semi-truck, commercial truck lease agreements may not allow for many cost-cutting measures that truck owners may enjoy.
Drivers may not be able to simply make up the cost with extra miles, as their lease agreement may restrict the miles they can drive their trucks within a specified time period to reduce wear. Such mileage restrictions can make it difficult to also make monthly payments on time. Required maintenance schedules, carrier-specific repair shops, and escrowed repair fees (just-in-case repair fees paid upfront) make staying on top of lease requirements tricky. And while some programs allow for a "walk away" clause for drivers that decide to turn their leased trucks back whenever they'd like, they may be responsible for returning said trucks and lose out on any deposits or escrowed payments made.
Even with all of these limitations, leasing semi-trucks can still make sense for many operators and companies, depending on the carrier and plan specifics. It pays to do your research and ask fellow trucking companies as well as individual operators which carriers and plans they'd recommend and which to avoid.
A basic lease acts as an extended truck lease agreement with a determined term and obligations from either party. An individual or a company enters into a semi-truck lease agreement with a leasing company. This is a fairly straightforward arrangement. Drivers may be expected to observe mileage restrictions while carriers may be required to cover certain maintenance items and the like.
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With this being said, several common clauses can be added to said agreements that can impact monthly costs, levels of service, and eventual ownership.
Within the framework of a "buyout lease" (also known as a "dollar buyout lease" or "$1 buyout lease") for a semi-truck, you would technically lease the commercial truck with the option to "buyout" the lease—or take ownership of the truck—at the end of the lease term for the cost of $1.
Though the leasing company owns the truck during the lease term and can take back any equipment if terms are not met, this option is more of a semi-truck financing plan than a semi-truck lease option. For this reason, this option will almost always increase monthly lease payments to pay for the cost of the truck.
A TRAC (Terminal Rental Adjustment Clause) lease allows for a more adjustable purchase rate and following monthly payments of a once-leased commercial vehicle at the end of a lease term.
Essentially, at the end of the lease term, if you decide you'd like to purchase the vehicle outright, the vehicle's residual value is determined and you can either (a) pay that amount to obtain ownership or (b) enter into a payment plan until you've paid it off. The residual value will determine the new monthly payment installment amounts.
In addition to TRAC leases, there are also two divisions of lease-to-own options: open-end and closed-end leases.
An open-end lease provides leasing parties with more freedom of use of the truck, including no mileage limits, eventual month-to-month plans, and the like. For these freedoms, there is a slight variable cost. An open-ended lease applies an adjusted rental rate against the truck's outstanding value at the conclusion of the lease term.
If you opt to turn the truck back in, the truck goes to auction. This is where open-end leases get interesting. You could end up receiving credit (or money back) for how much more the truck sells for or you may up paying the difference for the price the truck sold for at auction in order to end up square with the leasing company. This gaining and losing largely depends on how you treated the truck while in your care, but may still be subject to market conditions beyond your control.
If open-end leases seem like a bit of a gamble, a closed-end lease is a more stable option with a steady payment arrangement. Closed-end leases have defined lease terms, mileages, and term limits. All rates are prearranged—short of accounting for any damages at the end of the lease term. While closed-end leases provide a more predictable payment framework, they may also contain more usage restrictions on leased vehicles so leasing companies can increase their likelihood of recouping their investment in a vehicle.
Also known as a “maintenance lease,” a full-service lease consists of a leasing company covering maintenance and/or service of leased vehicles for an additional cost.
While these plans can sound very appealing, it pays to find out exactly what services, replacement parts, service stations, and mileage limitations are covered (and which are not) to manage expectations. Unexpected limits can make these deals go from seemingly great options to over-priced add-ons. However, many full-service leases are terrific options for companies and individual owners who'd prefer to not handle the logistics and surprise costs of servicing vehicles themselves.
Semi-truck leasing companies need the following information:
- Financial statements that have been prepared and certified by a credentialed accountant
- The type of freight you intend to haul
- How many vehicles you need to lease, and their types
- Any up-fitting (customizing) expenses
- The credentials of all intended drivers—usually a Class A Commercial Driver’s license
- Adequate insurance coverage (will vary by leasing company)
- Your proposed repayment schedule
Terminating a lease early may incur a penalty fee as high as 10% of the remaining total payment schedule. You may also have to pay the cost of transporting the truck back to the leasing company, including the cost of insurance. If it was a full-service contract, then you may need to pay for as much as 9 months of the agreed-upon maintenance fees. Any security deposit will not be returned.
Many semi-truck leasing companies specialize in trucking companies and independent truckers with a limited credit history, a poor personal credit report, or even a lacking business credit score. Some companies may gauge credit in other ways, such as an entity's time in business or payment history for other regular bills.
Some lease companies may offer a streamlined approval process with much higher rates and little-to-no down payment. Keep in mind that though a bad credit score may not inhibit being approved for a lease, poor credit scores may still impact monthly lease payment rates.
600 or higher. While 600 may seem like a fairly low credit score for leasing a semi truck, this is one of the perks of leasing versus buying a truck. If you fail to make your monthly semi truck lease payments on time, the leasing company can simply take back their truck—which tends to be less costly than a full-blown repossession that would happen in a purchasing situation.
As you might expect, there is fairly vast price range when leasing with factor impacting the monthly cost—including truck condition, truck style, location, lease terms, and even just between leasing companies. However, to lease a new semi truck, expect to pay anywhere from $1,700 to $2,600 per month. To lease a used truck, expect to pay around $900 to $1,700 per month. These costs may also vary based on necessary insurance, taxes, and other miscellaneous fees.
Be cautious of any leasing or rental agreement with:
Excessive Return Fees
Some companies require you to pay for “wear-and-tear” if you decide not to renew. Be sure to read the fine print closely!
Mileage Restrictions
Some leasing companies cap drivers at 12,000 to 15,000 miles per year, charging lease-holders 15 to 25 cents for every mile over the limit. These extra miles can quickly devour any profits you were hoping to earn.
Unclear Terms
Make sure your agreement specifically lists the length of the term, the interest rate, the payment schedule, and the final asking price.
No Maintenance Cap
Honest companies will have a limit on how much they can charge you for maintenance.
Miscellaneous Fees
Like any contract, there may be additional fees in a lease contract that may not be easily explained, but you will be agreeing to pay regardless. Ask upfront if there are any undisclosed fees with a lease not present in your lease terms.
Any Mysteries or Surprises
Before signing a semi-truck lease, it is crucial that you thoroughly understand the terms of the agreement. You should understand all schedules, restrictions, fees, and requirements. You will also need to plan on how you will make your monthly payment by calculating all other costs. There should be absolutely no surprises concerning your commercial truck lease.
Begin Your Semi-Truck Leasing Journey Today
To help you and your team get behind the wheel of quality commercial trucks to help you get the job done, My Little Salesman is pleased to provide a list of semi-truck leasing companies for you to compare. Also, you’re invited to search through our vast inventory of commercial trucks available for lease.
Prefer to Buy Your Next Commercial Truck?
If you’ve changed your mind about semi-truck leasing and have decided to buy your very own semi-truck or other commercial truck, we can help with that as well! The online heavy-duty equipment marketplace at My Little Salesman is home to over 18,000 commercial trucks for sale. Punch in your zip code to see everything from sleeper semis, day cabs, box trucks, and more for sale right in your neck of the woods.