Truck lease
Truck Lease

Truck Leaseback

Is your company in a cash crunch? Did you recently use a large amount of cash to purchase one or several trucks and now donít have the cash flow you expected? If so, a truck leaseback may be the only answer to your problems.

A truck leaseback is a process whereby a company sells an asset such as a truck back to the bank, in exchange for leasing that same asset for a fixed period. It can be a complicated and costly process for companies attempting to leaseback large fleets of vehicles, but if a company only has a few vehicles to leaseback, it can literally save a companyís books. Leasebacks can also rescue a company that is simply having a quiet time of year by deferring payment until the season when the company is most active.

Here are the steps involved in a truck leaseback:

  1. The truck or trucks are appraised by a third party and a value is agreed upon between the leaser and lessee.
  2. The leaser buys the vehicles back from the lessee at the agreed upon price.
  3. Sales tax is paid by the lessee in one of two ways.
  4. The two parties enter into an agreement whereby the vehicles are leased back to the lessee at a certain rate.

Thatís the process in a very basic nutshell. One of the drawbacks of a truck leaseback is the fact that the lessee will need to pay the sales tax on the transaction rather than the leaser. If an entire fleet of trucks is being leased back, that can be a significant amount of money. However, the sales tax can be rolled into the lease such that the lessee wonít need to pay it all at once. The drawback to withholding payment of the sales tax is that the amount the lessee pays will be significantly greater in the end, but if a leaseback is being considered, the lessee more than likely does not have much choice regarding payment of the tax.

The operations and administrative cost of a truck leaseback can also be quite high. All vehicles need to be re-registered to the leaser, which involves vast amounts of paperwork and various fees. The cost in capital may not be high, but it will keep the administrative department busy for a long period of time. In addition, all vehicle maintenance procedures will need to be changed or eliminated. If the lease is a full-service lease, maintenance will no longer be required, which will save money but possibly introduce confusion into the operation of the fleet.

Communication is key when implementing a truck leaseback. Every part of the company needs to know what the other is doing. This is the only way that all transfers can be conducted quickly and smoothly, without lost time due to resistance or widespread confusion. This line of communication must stretch all the way from the drivers to the management, ensuring no one is left out.

A truck leaseback is a last-ditch effort to avoid capital calamity. It can be a very valuable option for companies that find themselves in a difficult cash situation. However, it is a process with pitfalls all its own and should not be entered into without careful consideration of all possible consequences.

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