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Leasing a Tow Truck: The Pros and Cons

Posted On: January 25, 2023 author Paul Kendall

If you’re in the tow truck business, chances are you’ve considered tow trucks for leasing. After all, it’s an easy way to get the vehicle you need without having to make a large down payment. But as with any decision, there are pros and cons to consider. In this article, we will explore the various factors associated with leasing a tow truck and discuss the pros and cons of doing so. We will also provide tips on how you can select the right lease for your needs and use it to your advantage. So if you’re considering leasing a tow truck, read on!


For your selected mode of tow truck leasing, what are your financing options?

There are many different finance options available when leasing a tow truck. The three most common types of leases are $1 buyout lease, 10% put lease, FMV(Fair Market Value) buyout lease and simple equipment financing agreements usually come with early prepayment options and you remain the owner of the equipment the entire time.

Tow Truck TRAC Lease:

A terminal rental adjustment lease (TRAC) gives the advantages of tow truck leasing as well as provides you with the option to purchase the tow truck at the end of the lease. The following options are available at the end of the lease
At the end of lease you have the option to buy or buy another truck. 
Truck price is predetermined so you don't need to negotiate at the end of lease.
You have the option to choose high or low monthly payments and the option to to pay a higher purchase price at the end of the lease.

$1 Buyout or Lease to Own:

Also known as a capital lease, this allows the company to lease the tow truck for the set period of time. This lease allows the lessee to own the equipment for $1 at the end of the lease. The following options are available at the end of the lease

  • Purchase the equipment for $1


10% PUT (Purchase Upon Termination) Lease

The total lease amount is reduced by 10% with a Purchase Upon Termination lease, making the financing amount 90% of the total cost. Under this lease type, the lessee must purchase the equipment at the end of the lease term at 10% of the original equipment cost, so the following options are available at the end of the lease:
Purchase the equipment for 10% of the original cost
Upgrade or renew the lease

Fair Market Value (FMV)

Operating lease also known as an Fair Market Value lease, FMV allows the company to use a tow truck for a specified period of time. This is a good lease option for companies that upgrade to new equipment every few years. This lease provides the lowest monthly payment as well as three options at the end of the lease term:

  • Purchase the equipment for fair market value (You can usually negotiate this cost down to 10-20%)
  • Return the equipment
  • Upgrade the equipment or renew the lease

TTFA (Tow Truck Finance Agreement):

This is a combination of a lease and a loan. Tow truck finance companies do not require collateral on everything your business owns like a bank would. With this financing option, you own the tow truck throughout the term. The financial institution acts as a lien holder. With this financing option, you can take advantage of section 179 benefits.

The pros of Leasing a Tow Truck

Leasing a tow truck has a number of advantages over purchasing one outright. Perhaps the most significant advantage is that it allows you to get a new truck more often. This can be important because tow trucks are subject to a lot of wear and tear and can quickly become outdated.

Another advantage of leasing is that it generally requires less upfront capital than purchasing a tow truck outright. This can make it easier to get into the tow truck business or to expand your fleet.

Leasing also has the advantage of flexibility. Many leases allow you to put down a smaller initial payment and then make lower monthly payments for the remainder of the lease term. This can give you some much-needed breathing room when cash flow is tight.

At the end of the day, whether or not leasing a tow truck is right for you depends on your particular circumstances. But if you're looking for a way to get a new truck more often or to free up some cash flow, leasing could be a great option.

The cons of Leasing a Tow Truck

Tow truck leasing can be a great option for businesses in need of a reliable tow truck on a short or long term basis, but there are some cons to consider before making the decision.  There are a few cons to consider when leasing a tow truck. First, the total cost of the lease will likely be higher than buying one outright.  Tow truck leases don't include service and operating costs, such as fuel and depreciation. Additionally, you might have to pay interim rent on your tow truck lease and you my be subject to a 10-20% buy out on a FMV lease buyout. Finally, there are occasional disagreements between tow truck leasing companies and drivers over who is responsible for certain expenses (such as vehicle maintenance), which can lead to tension and conflict. Considering all these factors before deciding whether to lease or buy a tow truck could make a big difference in the end result.

How to Lease a Tow Truck

There are many reasons why you might want to lease a tow truck. Maybe you need a tow truck for your business but can't afford to buy one outright. Or maybe you want the flexibility of a short-term lease so you can try out a tow truck before committing to buying one. Whatever your reason, there are some things you should know before leasing a tow truck.

Here are a few tips on how to lease a tow truck:

1. Determine what type of tow truck you need. There are many different types of tow trucks, so it's important to figure out which one is right for your needs. Do some research and ask around to find the best option for you.

2. Find a reputable dealer or tow truck leasing company. Once you know what type of tow truck you need, it's time to find a reputable place to lease it from. Ask around for recommendations or look for online reviews to find a good company to work with. Trust Capital specializes in leasing tow trucks.

3. Get quotes from multiple dealers or tow truck leasing companies. Once you've found a few good options, get quotes from each of them so you can compare prices and terms. This will help you get the best deal on your tow truck lease agreement.

4. Read the fine print carefully before signing anything. No matter how good the deal is, make sure you read and understand all the terms and conditions of the lease agreement before signing anything. Read about the pre payment penalties. This includes understanding any early termination fees or other penalties that could apply if. Decide if you want a $1 buyout lease, TRAC Lease or FMV Buyout lease. 

Final Thoughts On Leasing a Tow Truck: The Pros and Cons

In conclusion, leasing a tow truck can be a smart and economical decision for tow truck operators. While there are some drawbacks associated with leasing, the advantages generally outweigh them when one considers the money saved in terms of lower monthly payments and other benefits like reduced maintenance costs. Ultimately, it is up to you to decide whether or not leasing a tow truck is the right choice for your business.


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