Are you debating whether you should finance a used tow truck or just pay cash? This article is going to help you make an informed decision so when you do purchase your next truck, you go in armed with the right information.
There’s more than one way for you to get the tow truck you need to succeed. Paying cash and getting a used tow truck loan are both viable options, depending on the factors of your business and the financial considerations involved.
However, choosing between the two is no easy task.
Insider look at how to decide whether to pay cash or finance a used tow truck for your business
“Understanding the pros and cons of each option is critical for success.”
You’re going to have to make a decision, and it will have a direct impact on your towing company one way or another. You’ll have to choose whether to front the cash and buy your truck outright, or finance a used tow truck (or new one if you prefer).
What’s the impact?
If you have to shell out $45000 for a used tow truck, that is $45000 less dollars in your account to be ready for emergencies, other investments, heck, even payroll during slow times.
If you were to finance that tow truck, you are now making monthly payments. Yes there is interest, but you still have that $45000 in your bank account to cover any business needs or surprises.
It will come down to knowing whether you can afford the monthly payment. Something else to consider is if you will be generating enough business with your new tow truck. You want to afford the payments as well as make some profit.
Nobody can answer that question for you, it’s strictly based on your business history.
Look to your previous 2 years of operation, are you seeing growth, decline, or is your business simply monotone?
Let’s take a quick look at your needs, and we’ll put the whole paying cash or finance a used tow truck in better perspective.
Addressing Major Small Business Equipment Needs
Businesses ranging from restaurants to trucking firms and construction companies all have major equipment needs. Restaurants depend on their flat-top grills, walk-in coolers, dishwashers, ice machines, ovens and many other items to safely make delicious meals. Without them, there’s no way for a restaurant to operate.
Although the type of gear is different, the same sentiment is true for Tow Truck companies.
From Flatbed Tow Trucks, Integrated Tow Truck, Hook and Chain Tow Trucks, to large rotators every type is an essential part your Tow Truck company’s backbone.
Equipment is so vital to day-to-day operations in many industries across the national economy. It’s similarly important that small business owners find the best possible way to pay for it.
Let’s consider the benefits and drawbacks of the two major options
You have the choice of paying cash or you can finance a used tow truck – simple right?
- You pay for it, you own it. Once you fully purchase your equipment, it belongs to you, and no one else has an ownership stake.
- Purchasing is often less expensive overall than leasing.
- Section 179 of the U.S. tax code allows for significant tax deductions on purchases of large business assets. This applies to many, although not all, situations. Speak with your tax professional to be sure your purchase will apply.
Paying Cash cons:
- High initial costs can quickly drain available capital. This make it difficult for businesses without huge cash reserves to make the purchase.
- You’re ultimately responsible for the equipment as it ages and reaches the end of its useful life. It may take a lot of time and effort to sell the older equipment or otherwise dispose of it.
- For those two reasons, purchases are less flexible and require a much stronger commitment.
- Cash Flow! If you finance a used tow truck then the cost of the equipment is spread out over time. This means you retain more cash on hand for the many other financial needs of your towing company.
- Payments are often, although not always, tax deductible.
- Similarly, there are many situations where Section 179 of the tax code can lead to substantial deductions. To be sure about your ability to receive this valuable deduction, discuss it with your tax professional.
- Financing can mean more options or bigger truck with more options to ensure it is the perfect fit for your business.
- You will pay interest charges over the term of the financing.
- A payment term (worked out during the loan or lease process).
So Will You Pay Cash or Finance a Used Tow Truck When the Time Comes?
There are many factors to consider when deciding how your business should acquire new equipment. This article should clear up some of the frustrations involved with making those tough decisions.
Unfortunately, there is no one size fits all answer to this question. However, if you are looking to keep money in your company, yet you need to buy a used tow truck, then financing might be your best option.
Special Free Offer For Those Who Apply Through Tow Dough
If you want to finance a used tow truck, and you’re worried about putting it to work, we have partnered with a digital marketing agency that has offered to give successful applicants a Free 45 minute consultation that will give you information you need to get more customers and work.
To take advantage of this limited time offer, just click the button below and apply today, once approved, we set up your meeting.
When you choose Tow Dough to secure financing so you can directly purchase the truck. You have an experienced and helpful partner who has your best interests at heart.
We’re here to help you secure equipment in the way that makes the most sense for your business.