If you’re in trucking, there’s a good chance you will be sticking to one type of product or material that you are hauling. This is not true for everyone though. So the answer to the question “Should I buy, rent, or lease a trailer” depends on your situation.
Here are things to consider when deciding whether to rent, buy, or own a trailer. We’ll talk about the accounting side of every aspect.
Does it make sense to buy or lease a trailer
What type of Trailer? There are flatbeds, open deck trailers, Double Drop or drop frame trailers, Dry vans, Refrigerated Reefer Trailers, tank trailers, Cattle & Livestock trailers, Grain Hopper Trailers, Beverage Trailers, Pup Trailers, Roll Off Trailers, Open and Closed Car Carrier Trailers, Tower Trailers, Curtain Side Trailers, Chipper Trailers, Moving Trailers, Dump Trailers, Intermodal Container Chassis, Log Trailers, Open top trailers, Pole trailers, and boat trailers to choose from. There are probably more, this is the list I came up with. Each type of trailer could be significantly different when it comes to average cost, maintenance, and lifespan. So the type of trailer could determine whether it is a good investment to buy or lease, or if it is better to rent. If a trucker is going to be using many different types of trailers, it's probably going to save money by renting them.
Do You Have Your Own Authority? If the Owner Operator owns their own tractor and has their own authority (no dispatch/The owner operator is responsible for finding loads and regulatory compliance), they’ll probably opt to own their own trailer as well. They may also want to consider renting if the trucker is taking on different loads or is in the beginning of their business. If a truck driver owner operator does not have their own authority, there’s a good chance they are on a lease op, and if you don’t own your own truck, why would anyone want to buy a trailer? If you are in this situation and have an explanation, please let me know. Even some drivers that have their own authority can get away without buying or renting if the customer provides the trailer.
Are You Power Only Trucking? If your working for a third party logistics company that owns or leases it’s own trailers, then there is no need to worry about providing a trailer. We see this in probably the majority of situations, for example the energy industry, where trailers are not part of the equation as far as the carrier goes. The trailer gets dropped and left behind at the receiving location. Often, the driver hooks up another trailer that has been loaded (or an empty trailer if returning an empty trailer) at the receiving yard to take back on the return trip. This way, there’s no live loading and unloading where the driver has to back up to the loading dock and wait for the trailer to be unloaded or loaded. So, no need to worry about trailers for power only truckers.
What does your Truck Lease Agreement Say? Some lease agreements do not even allow you to pull your own trailer. The lease agreement for the tractor may state that you have to haul for a third party logistics company or shipper. This is because custom loads could mean more abuse on the truck.
Conclusion
In my estimation, buying a trailer is going to work more for local truckers and small companies who are hauling their own equipment to jobsites, and truckers who own their own trucks and are hauling in a single industry. These owner operators can benefit from owning or leasing their own trailer. They can buy exactly what they need, customize it to work for their loads, add lighting, and decal wrap it to promote their trucking business. The advertising alone might make it worth it to own.
As far as accounting goes, when a trailer is bought or leased in Canada, it is considered a Class 10 asset. It should be expensed annually at a 30% declining rate. The expenses you can expect when buying or leasing a trailer will be acquisition & financing costs, maintenance costs for tires, air systems, lights, etc., registration costs, added insurance costs, and Inspection costs. If the option is between renting and owning or leasing, the rentals can run a driver roughly 10% of the total pay. You can calculate the costs of owning a trailer and see for yourself if it adds up to more or less than 10% of your total pay.
Accounting for equipment and trailer rentals means that trailer rental expenses are 100% deductible in the tax year the expense in incurred.
Accounting for trailer leases will most likely qualify as a capital lease, where the remaining lease payments are recorded as liability and the capitalized lease is recorded as a amortizable/depreciable asset.
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