Buy or Lease a Bus ?

Making the decision between leasing and buying for a major purchase can be stressful — especially when that purchase is a bus that has to provide quality, dependable transportation for your company, church or assisted-living community. So which one is the one you should choose?

Unfortunately, the answer to that question is often not an easy one to ascertain. Fortunately, however, BusGroup has partners in the finance sector who help customers make that decision every day, and they are often a helpful source of information for BusGroup customers in need of advice for their particular financial situations.

One of BusGroup’s partner companies for bus financing is TCF Equipment Finance (TCFEF), based out of Minneapolis, Minnesota. Dan Boie, TCFEF’s director of finance for shuttle buses for the United States, says leasing generally is the option of choice for customers who operate for-profit businesses. “Usually, with a lease, for-profit companies are able to write the full payment of the lease off as an expense because the bank holds the depreciated value of the bus,” he explains. “For users who put a lot of miles on their buses, like hotels or parking companies, they have a pretty good idea of when they’re going to want new equipment, so a lease lets them focus on their core business, rather than worrying about depreciation, a lot of maintenance and so on.”

By contrast, buying a bus through a loan is usually a more viable option for churches, daycares, assisted-living communities and other organizations. These users may not want new equipment every four or five years — instead, they may want their bus to last 10 or even 15 years, Boie says.

Both types of financing offer their own unique advantages and disadvantages. Paul Dvorak, regional sales manager for Key Equipment Finance in Shakopee, Minnesota, is another of Bus Group’s partners for bus financing. Dvorak says BusGroup customers may be attracted to the flexibility inherent in leasing. “You can set up a lease to have lower payments, you can have less out-of-pocket expense up front, and you can skip payments or have balloon payments to match your specific needs,” Dvorak notes. “However,setting up residuals on an aggressive basis to trade for that lower payment may end up costing customers money at the end of the lease if the bus isn’t worth what’s left on the residual.” Experienced financial partners, such as Key, can help purchasers set up leases in ways that work best for them.

For purchasing with a loan, Boie says the simplified terms and fewer requirements for customers to meet are their top advantages. Also, he says the Economic Stimulus Act of 2008 that was passed by Congress and signed into law by President Bush includes a first-year depreciation tax deduction of 50 percent for equipment placed in service after December 31, 2007, and before January 1, 2009, including buses. This deduction is in addition to the current depreciation allowed under the Modified Accelerated Cost Recovery System. “This means there will be a bigger tax advantage for loans this year,” Boie explains. “So many businesses that might have gone with leases before will be considering loans for their buses this year.”

Oftentimes, the key for determining which financing option will work best with a given customer depends on clear communication between the customer and the financial institution. “It’s critical for us to communicate with the customer to be able to determine their overall financial strategy,” Dvorak states. “Because we offer both traditional financing and leasing, we’re able to help BusGroup customers make the decision that’s in their best interests — not a decision that’s based on what we are able to provide them.”

Though the purchasing and leasing processes can each be daunting, Boie says BusGroup customers can rest assured that they are in good hands. “BusGroup is the premier bus distributor in the Southeast, and their experience and knowledge is why that’s so,” he notes. “On our end, we understand their business and their products and the needs of their customers, and we work to make leasing or buying a bus a more pleasant, enjoyable experience for everyone.”