Buy or Hire

Which is right for me?

Buy or hire, that is the question

Whether to buy outright or opt for contract hire will be a policy decision. In order to get this right you will need to consider the advantages and disadvantages of each. How you view many of the factors involved will depend on how your business works. It can be quite complicated so you may want to look at the table of advantages and disadvantages below;

Purchase

Advantages

  • You own the truck and can do what you want with it, when you want
  • It is an asset that can be shown on your balance sheet
  • You may be able to claim capital allowances against any purchase

Disadvantages

  • You are responsible for all maintenance and repairs
  • The asset will depreciate over time
  • There will be a large up-front cost, possibly affecting cash flow
  • You will have to deal with unexpected costs as they arise and with any associated operational delays. This may involve hiring in replacement equipment
  • Reduced flexibility over time

Hire

Advantages

  • No capital investment
  • Ability to budget for fixed monthly costs with no unexpected repair costs
  • Improves cash flow
  • No need to worry about the disposal of equipment at the end of the contract, with ability to start new contract with new equipment
  • Service and maintenance is the responsibility of the supplier, usually with guaranteed service levels
  • Contract will usually include replacement in the event of breakdown, allowing for business continuity
  • Can be offset against tax
  • May give access to supplier’s fleet management system with enhanced operational data
  • Legal compliance and peace of mind (assuming you hire from an FLTA Member company)

Disadvantages

  • The truck is not owned and so cannot be modified without supplier consent
  • Will not be included on balance Sheet
  • May have to pay for repairs at end of contract – but see section on fair wear and tear

FAQ’s

Yes, it is 100% allowable against taxable profits. Importantly, you can claim the full amount of each year’s hire payments. With outright purchase you could only claim capital allowances on a figure that diminishes every year.

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