Why Purchase? In a vehicle purchase, the customer makes a down payment on the cost, and pays the balance in monthly payments over the term of the loan. The monthly payment will include a principal payment (which reduces the amount owed) and an interest payment. Normally, only the interest payment is deductible as a business expense. The depreciation of the vehicle over its lifetime is normally tracked as a separate expense for tax purposes. After paying off the purchase loan, the customer owns the vehicle outright, and may continue to use it or sell it. What’s the first thing I should know about purchasing a new commercial vehicle? In a vehicle purchase, the customer makes a down payment on the cost, and pays the balance in monthly payments over the term of the loan. In the financing industry, the acronym ''MAST'' is used to describe the business factors that influence the type of financing used: Mileage, Application, Specifications, And Terms of Service. What should these factors influence my decision to purchase or lease a vehicle? Mileage The number of miles anticipated for the vehicle’s service life affects the financing decision, particularly with leases. Application The specific use of the vehicle may be very important in the financing decision. Vehicles that are subject to a great deal of wear and tear may need special purchase or lease arrangements. Specifications The exact vehicle configuration, including accessories and unfitting will influence the financing decision. Terms The length of time the vehicle is expected to be in service is also important to financing. What factors should I consider when purchasing a vehicle? Monthly Payment Monthly payment will include a principal payment and an interest payment. Depreciation of the vehicle tracked as a separate expense for tax purposes. Payoff Customer owns the vehicle outright, and may continue to use it or sell it.

Why Lease? A lease is a financing method in which the customer only pays for a portion of a vehicle's cost. That portion is paid in monthly payments over the term of the lease. The portion of the vehicle’s cost that is not paid by the customer is called the residual value. The relationship between the price of the vehicle and its residual value at the end of the lease term is important in leasing, because it determines how much the customer will pay. How is the cost of a lease calculated? Start with the negotiated selling price of the vehicle, also called the capitalized cost. From that number, subtract the residual value. This equals the lease amount. Multiply the lease amount by the lease factor to get the total lease cost. What is a ''lease factor''? The ''Lease Factor'' determines how much the customer will pay in lease charges over the life of a lease. It is similar to the interest rate charged on a purchase loan. What is the ''lease term''? The period of time for which a lease agreement is written is called the Lease Term. Business customers typically have several options available at the end of their lease terms. What are the options at lease termination? End of Term Options: Purchase vehicle for residual amount specified in lease agreement Extend lease by financial residual value Turn in the vehicle What factors affect how the lease residual is calculated? The residual value depends on several factors, including the... Expected average annual mileage Expected use Number of months in the lease Make, or model vehicle, and... Resale history of similar make vehicles.