Owning vs. Leasing: Which Is Better for You?
You’ve already decided to electrify your fleet. Now you need to figure out whether you should buy your own your electric trucks, vans, buses, and electric vehicle service equipment (EVSE) or lease them from a third-party provider such as 7Gen. Depending on the specific needs of your company, 7Gen can help get you into the right electric vehicle (EV) and support your charging infrastructure.
The case for owning
Incentives vary from province to province. “When it comes to trend-spotting in Canada’s EV space, most heads turn west to B.C. or east to Quebec,” writes Brian Banks of Electric Autonomy. As of now, these are the only two provinces that offer rebates on large electric trucks: B.C.’s CleanBC Go Electric Specialty Use Vehicle Incentive (SUVI) program and Quebec’s Écocamionnage program. B.C. offers $100,000 for every medium-to-heavy-duty truck, while Quebec offers up to $200,000 per heavy-duty truck. These rebates are also applicable for leased vehicles but require minimum lease lengths to be applicable.
In addition, federal EV incentives in Canada allow businesses to deduct up to $55,000 of the capital costs of zero-emission vehicles. So while it may be more expensive to own up front, you’ll save money in the long run.
That said, not all federal and provincial tax incentives and credits apply strictly to owners. There are also carbon credits and rebates available to those who choose the leasing route. These include the Canada-wide Zero Emission Vehicle Infrastructure Program (ZEVIP), B.C.’s SUVI and Commercial Vehicle Pilots (CVP) programs, and Quebec’s Écocamionnage program. However, finding and applying for these programs isn’t always easy, and applicants need to ensure they adhere to reporting requirements.
Lease payments are also tax deductible. On top of rebate programs, this can help reduce your monthly costs.
Control over your fleet
Some fleet managers prefer to own their vehicles and equipment because they believe it will give them total control over their product. Having control over your assets is definitely appealing, but it’s important to consider that this means you’ll be responsible for maintenance and the costs that come with it, as well as finding qualified technicians to perform the work.
The case for leasing
First, we need to define the different types of leasing available. With finance leasing, the risk and return are assumed by the lessee, including asset ownership (or a guarantee on residual value). With operating leasing, however, the risk, return, and ownership are the lessor’s responsibility.
Historically, operating lease assets were kept off the balance sheet and the monthly payments were considered operating expenses. However, recent updates to US GAAP and Canadian IFRS accounting standards now require leased assets to be recognized on the balance sheet, removing this benefit of operating leases.
Leasing also benefits companies as far as the purchase price is concerned. Instead of covering the full price of the vehicle or equipment upfront, the customer covers its depreciation and interest over the term of the lease. The result is a significantly lower down payment.
Shorter equipment lifecycle
EV technology is constantly evolving. Today’s zero-emission trucks aren’t just leaps and bounds ahead of what was available a decade ago—they’re also miles ahead of the tech that existed just last year. This comes with upsides and downsides. To stay competitive in your industry, you always want to be on the cutting edge in terms of equipment. This isn’t always a cost-effective option when you own.
Leasing provides much-needed flexibility to companies that frequently update their equipment, protecting them from obsolescence. More specifically, lessees are able to integrate the latest technologies into their fleet as soon as they become available. This means a lower cost of ownership and better, safer vehicles overall. In turn, this can help you recruit and retain drivers.
One commonly cited advantage of owning over leasing is the ability to recoup some of your money down the line through resale. But as Senior Vice President of Penske, Jim Lager, told Truckinginfo, that’s hardly an advantage these days with speedy obsolescence: “With technological advances that are moving at a constant and rapid pace, the leasing option is becoming more and more attractive to owners, who are less willing to take on resale requirements in future, uncertain used truck markets.” This, plus less familiarity with charging infrastructure options and operations, are some of the reasons that 7Gen’s clients are choosing to lease their electric vehicles and chargers.
EV infrastructure and range anxiety
According to ChargedFleet’s Lauren Fletcher, whether you’re buying or leasing, there are two common challenges that fleet managers have to consider with fleet electrification:
- Infrastructure: Acquiring an EV truck isn’t the same as acquiring a traditional diesel/gas truck. Before you can even consider whether or not the vehicle will meet your needs, you have to make sure that your facility can support the charging stations and unique EV maintenance requirements (i.e., the EV infrastructure).
- Vehicle range: How far do your trucks need to go? How quickly can they be recharged? How and where can they be recharged? The last thing any fleet manager needs to deal with is so-called “range anxiety.”
An EVaaS provider works directly with fleet managers to determine the best vehicle for them, finding the sweet spot between a 100-mile range EV and a 300-mile one. No one wants to overpay for something they don’t need, but you also don’t want to underpay for an EV with too short a range. The same goes for charging infrastructure. 7Gen can help you choose the best equipment to meet your fleet’s needs so that you don’t have to worry about uninstalling and reinstalling new EVSE down the line.
What’s best for your fleet?
Ultimately, it all comes down to your company’s specific needs. How many trucks do you need? Do you have the resources and infrastructure required to plan, deploy, own, and maintain them? Furthermore, what does your company value most—short-term affordability, or long-term savings? Lastly, what’s more important—having control over your assets (and all the responsibilities that come with that), or the convenience of relying on a third-party provider for maintenance?
Companies of all sizes need to weigh the benefits and costs of leasing versus ownership to determine which option is the best operational fit and allows them to balance capital expenditures, tax incentives, and cashflow requirements. Also, when it comes to leasing, having more capital instead of being locked in for years is a great way to free up cash so that you can grow other projects related to your core business.
Choosing whether to lease or buy one or more electric vehicles doesn’t have to be so black and white. Some companies may decide to buy a portion of their fleet’s vehicles and charging stations and acquire the rest through capital/financing or a full-service lease. Ultimately, you need to choose what’s best for you. Should you opt for leasing, 7Gen is here to support you on the road to fleet electrification. Thanks to our experience and connections in the EV space, we can help you secure competitive pricing, manage your new technology, and handle any issues that arise during the transition process.