Buy or Rent Your Business Truck? The Financial Showdown for a Small Business Owner
- James Flecker
- Jun 27
- 3 min read
Updated: Jun 29
Picture this: You’re a busy entrepreneur running a successful S corporation. For the sake of the dream, let’s say that you’re a busy thirty-year-old entrepreneur running a successful S corporation. You’re wearing the “Boss” hat (with your trusty W-2 perched underneath), and your business demands a shiny new truck—say, a $65,000 beast financed at 6% interest for 5 years. The age-old question you’re stuck on: “Should I buy or lease?”
Let’s crunch the numbers and figure out which route leaves you with the most cash to turbocharge your Simple IRA, which you’ve wisely set up with a 3% employer match. Bonus: We’ll project what that Simple IRA could be worth when you can withdraw penalty-free at age 59½.
Scenario 1: Buying the Truck
Purchase Price: $65,000
Interest Rate: 6% per year (0.5% per month)
Term: 5 years (60 months)
Monthly Payment: ≈ $1,256
Over 5 years, you’ll shell out a total of about $75,360 ($1,256 × 60), which includes $10,360 in interest.
If the truck qualifies for Section 179 (hint: many trucks over 6,000 lbs do), you could write off the entire $65,000 in Year One. Assuming you’re in a 25% effective tax bracket, that means you’d pocket around $16,250 in tax savings ($65,000 × 25%) right away.
However, the downside? No big depreciation deductions in future years, and you’re stuck with a $1,256 monthly payment—which means less free cash to invest elsewhere.
Scenario 2: Leasing the Truck
Monthly Lease Payment (Estimate): $900
Annual Lease Cost: $10,800
Total Lease Cost Over 5 Years: $54,000
Since lease payments are 100% deductible, you’d get an annual tax savings of about $2,700 ($10,800 × 25%). Over 5 years, that’s $13,500 in tax savings—a bit less than the purchase tax savings but spread out more evenly.
Cash Flow Difference & Investment Potential
Leasing saves you $356 per month compared to buying. If you invest that extra cash into your IRA each month instead of sending it to the truck lender, you’d contribute $21,360 over 5 years. But let’s think bigger: if you invest that $356/month into your Simple IRA instead of tying it up in a truck loan, here’s what happens:
Assumed Growth Rate | Value at Age 35 (after 5 years) | Value at Age 59½ (retirement) |
5% | ~$24,000 | ~$83,000 |
7% | ~$26,000 | ~$109,000 |
10% | ~$28,000 | ~$181,000 |
Yes, you read that right. That $21,360 investment over 5 years could turn into $181,000 by the time you retire (if the market cooperates at 10% annually). Even at a conservative 5% growth rate, it’s still $83,000—all because you chose to lease instead of buy.
Head-to-Head: What’s the Best Move?
Immediate Deduction vs. Spread-Out Deduction
Buy: Upfront $16,250 tax savings if using Section 179.
Lease: Steady $2,700/year deduction (total $13,500 over 5 years).
Cash Flow Flexibility
Buy: Stuck with $1,256/month payments.
Lease: Frees up $356/month to invest in your Simple IRA.
Long-Term Ownership
Buy: Truck is yours after 5 years (but depreciation is gone).
Lease: No ownership, but you can always upgrade.
Retirement Boost
Buy: No extra Simple IRA investments.
Lease: Potentially turns into $83K–$181K at retirement!
So, if you want to: lower your monthly costs; still get tax deductions; and use the savings to supercharge your Simple IRA…then leasing + investing is the way to go. But if you need an immediate tax break and plan to drive the truck forever, buying might make sense. At the end of the day, it’s about maximizing your dollars—not just today, but for future you (who, let’s be honest, will want to retire in style).
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