There are many different options out there if you want to lease a vehicle or other form of equipment. If you want to find out about dump truck leasing, you will quickly find that there are two key options available to you: open end and close end. So which one of the two is best?
Open End Dump Truck Leasing
Most commercial businesses use this option and it is suitable for heavy equipment, specialty machinery, luxury vehicles, and so on. As the lessee, you will have to make your monthly payments as per your agreement, but the buyout clause will be very different. All leases come with a buyout clause, which usually means that you have to pay a percentage (10% or 20%) of the fair market value to own the equipment at the end of it. However, with specialty machinery, predicting fair market value in a set number of years is very difficult, which means you will have to pay so-called “residual value” instead. This is the open end lease, which has its pros and cons. In fact, it is a little bit like gambling. You, as the lessee, hope that your equipment will depreciate significantly so that your buyout figure is very low. The leaser, meanwhile, hopes the equipment’s value stays strong, so that the residual value is still very high, leaving you with a massive balloon payment to make.
Close End Dump Truck Leasing
Close end leasing is rarely offered on dump trucks because it is such specialized machinery. In fact, most closed end lease contracts are found in the retail automotive industry only. These leases are designed for people, rather than corporations. This means that the residual or buy back value is also guaranteed. It is reasonably easy to predict the fair market value of a vehicle at the end of a certain period of time, presuming it is used properly and looked after. These leases are also commonly referred to as the “walk away” lease, which means you know exactly how much you have to pay at the end of the term and own the equipment. This gives you peace of mind and it means that you can be properly prepared. On the other hand, it is possible that the end payment you make is actually more than what the vehicle is worth, but this is quite rare.
So which one should you choose? Unfortunately, you are likely to find that, with dump trucks, only the open end lease is available so you don’t have a choice anyway. However, don’t let this deter you. In most cases, people don’t want to own their equipment at the end of their lease anyway. Rather, they return it and take out a new lease contract on a newer piece of equipment. Do make sure, however, that you consider all the implications of leasing and that you discuss these with your financial advisor so that you can find the most appropriate solution for your particular needs.