Maintaining a fleet of business vehicles or trucks can be costly. Beyond the initial purchase price, you face ongoing expenses like maintenance, repairs, fuel, insurance, registration, and taxes. These costs can add up quickly and impact your bottom line. That’s where fleet financing comes in.
Used by companies across various industries that use more than five vehicles, fleet financing provides the funding you need to buy new or used business vehicles or trucks, expand your fleet, and make payments over a convenient term. This option helps preserve your cash flow, boosts purchasing power, and may offer tax benefits. This Magis Funding Solutions blog post covers fleet financing, how it works, how to choose a lender, and more.
Benefits of Fleet Financing
Businesses in many sectors rely on commercial vehicles, trucks, and vans to keep operations running smoothly. These sectors include construction, transportation/logistics, landscaping, healthcare, retail, and food and beverage services. Often, companies need to invest in multiple vehicles simultaneously but lack the financial resources for a large cash purchase.
Fleet financing allows business owners to acquire necessary vehicles without depleting cash reserves or taking out long-term loans. Qualified businesses can borrow larger amounts, maintaining a modern, reliable fleet that supports growth and meets customer demands.
Flexible term options enable companies to tailor repayment schedules to their cash flow patterns, preserving capital and credit lines for other investments and daily operational needs.
Fleet Financing and Business Taxes
Fleet financing comes with tax advantages. Monthly finance payments are often tax-deductible under Section 179, potentially lowering your tax burden and boosting your bottom line. The Section 179 deduction applies to work and specialty vehicles used for business purposes, such as cargo vans, box trucks, heavy SUVs, pickup trucks, dump trucks, shuttle vehicles, and tractors.
Consult an accountant to determine if you can deduct all or part of your fleet’s finance payments. Your accountant will also help you elect Section 179 and complete IRS Form 4562 when you file your business taxes.
How Fleet Financing Works
Fleet financing, also known as equipment financing, is a straightforward option to expand your fleet. It involves securing funding to finance multiple vehicles at once, offering potential cost savings compared to financing each vehicle individually.
You’ll make monthly payments (principal plus interest) over a predetermined term outlined in the agreement. Lenders consider three main factors when reviewing your application—your business’s credit score, annual revenues, and time in business. A good credit score, robust revenues, and several years in operation increase your chances of approval.
Choosing a Fleet Financing Lender
Selecting the right lender is crucial for successful fleet financing. Banks and credit unions offer traditional options like term loans, while specialized business lenders provide tailored equipment financing solutions.
Magis Funding Solutions, for example, understands the unique challenges of fleet management and can customize solutions to meet your immediate and long-term needs. We collaborate with commercial vehicle vendors nationwide to facilitate quick fleet transactions.
Compare offers from several lenders to find the best fit. Consider factors like interest rates, repayment terms, and additional services. Remember, the most affordable option isn’t always the best—choose a lender that understands your industry and can support your growth.
Fleet financing can be a game-changer for businesses looking to maintain and expand their vehicle fleets. By understanding how it works and choosing the right lender, you can ensure your business stays on the road to success.
