Buy vs lease a truck for business turns on how long you keep it: buy if more than five years, lease if you turn vehicles every three, stay under the mileage cap and want the cash elsewhere. Tax is simpler than it looks in 2026: a bought pickup with a six-foot bed or a cargo van over 6,000 pounds can usually be expensed in year one under Section 179 and 100 percent bonus depreciation, and a lease is deducted as you pay it. Cash is what owners skip. The year-one deduction does not put the down payment back in the bank, and the loan payment hits your debt coverage every month.
Three ways to pay for a truck
A financed purchase means you own the truck, the lender has a lien on it, the loan sits on your balance sheet as a liability, and the truck sits there as an asset that you depreciate. Interest is an expense on the profit and loss. Principal is not, which is one reason net income and the bank balance disagree.
A true lease means you rent the truck for a fixed term, deduct each payment as an expense, and hand it back at the end or buy it at a stated residual. You carry a mileage allowance, usually with a per-mile charge above it, and you pay for wear beyond normal.
Mileage is the third route. For 2026 the IRS set it at 72.5 cents a mile for business use, up 2.5 cents from 2025, in its release of 29 December 2025. You deduct miles instead of actual costs and depreciation, which suits a lightly used single vehicle and not a crew truck doing 30,000 miles a year. One rule catches people: a leased vehicle that starts on the standard rate must stay on it for the entire lease, including renewals.
Contractor magazine, writing about the work truck decision in October 2024, put the dividing line where most fleet managers do: lease cycles run three to five years, and ownership makes sense when a vehicle stays in service beyond five to seven. How long you will keep it is the first question, and it has nothing to do with tax.
Section 179 and bonus depreciation for a truck in 2026
Section 179 is the part of the tax code that lets a business deduct the full cost of qualifying equipment in the year it is placed in service instead of depreciating it over several years. For 2026, per Section179.org's vehicle guide updated 11 June 2026, the deduction limit is $2,560,000, with a phase-out starting at $4,090,000 of total equipment purchases.
Bonus depreciation is a separate first-year allowance that applies after Section 179, and 100 percent bonus is back for property acquired and placed in service after 19 January 2025. Together they mean a qualifying truck put to work in 2026 can usually be written off in full that year, provided business use is above 50 percent.
The vehicle rules turn on weight. Vehicles over 6,000 pounds gross vehicle weight rating but under 14,000 are subject to a $32,000 Section 179 cap if they are SUVs, but a pickup with a cargo bed of at least six feet that is not accessible from the cab, and a cargo van with no rear seating, sit outside the cap and can take the full amount. Vehicles under 6,000 pounds are treated as passenger automobiles, and the Journal of Accountancy's 4 March 2026 summary of the IRS limits for 2026 puts year one at $20,300 with bonus, or $12,300 without, then $19,800 in year two, $11,900 in year three and $7,160 a year after that. A half-ton crew cab with a short bed can land under 6,000 pounds and on the small schedule, so check the door sticker before the price.
Common advice at year end is to buy the truck in December for the write-off, and we would call that a tax decision that costs you a cash decision, because the deduction saves you tax at your rate while the truck costs you a hundred percent of its price. At a 32 percent bracket, a $58,000 truck bought in December saves about $18,560 of tax next April and takes $58,000, or a down payment and five years of payments, out of the business now. If you needed the deduction rather than the truck, a truck is an expensive way to get one.
What the dealer's lease-versus-buy sheet leaves out
Dealers and some advisors show the decision as an after-tax comparison over three years. The Vantage Group's March 2026 example is typical: a $45,000 vehicle leased at $600 a month costs $21,600 over 36 months, or $14,688 after tax in a 32 percent bracket. Buying the same vehicle, writing off the full $45,000 in year one for $14,400 of tax saved, and selling it after three years for $28,000 leaves a net cost of $2,600. The lease loses by $12,000, and the page notes there is no Section 179 deduction on a lease.
Three things are missing from that page. The $45,000 has to come from somewhere, either the bank account today or a loan with its own interest, and the comparison treats it as free. The sale proceeds are taxed: when you sell a truck you have written off in full, the $28,000 is taxable income, which at the same 32 percent takes about $8,960 back and moves the buy-side net cost to roughly $11,560. And the $28,000 resale value is a guess about the used truck market three years out. Nobody knows, and the honest version of any three-year comparison says so.
The cash view: three years, side by side
Price one truck three ways: a three-quarter-ton pickup at $58,000, for a business in a 32 percent bracket. Buying outright pays $58,000 on day one. Buying with a loan puts $9,000 down and finances $49,000 at 7.5 percent over five years, a little above the 6.75 percent fixed median that urban banks reported on new term loans in the Kansas City Fed's survey for the last quarter of 2025; the payment is about $982 a month. Leasing the same truck runs $865 a month for 36 months with $2,500 due at signing.
| Buy outright | Buy with loan | Lease | |
|---|---|---|---|
| Cash out, year one | $58,000 | $20,784 | $12,880 |
| Cash out, years two and three | $0 | $23,568 | $20,760 |
| Total cash out, three years | $58,000 | $44,352 | $33,640 |
| Tax saved over three years at 32% | $18,560 | $21,175 | $10,765 |
| Net cash cost, three years | $39,440 | $23,177 | $22,875 |
| What you hold at month 36 | A truck, no debt | A truck and about $21,800 of loan | Nothing |
Over three years the loan and the lease cost almost the same cash, and the outright purchase costs far more, which is the opposite of what the tax page suggested. The difference is what you own at the end. If the truck is worth $31,000 at month 36, the loan buyer is about $9,000 ahead of the lessee after clearing the loan, before any tax on a sale; at $22,000 they are roughly even. The comparison turns on a resale value no one can promise, and on whether you would keep the truck into years four and five, when the loan buyer's cost falls to the payment alone and the lessee starts again at $865. What the table cannot show is the mileage penalty and the condition charge on the lease. For a business whose trucks come back with a dented bed and 18,000 miles a year, a lease is rarely as cheap as its payment.
What the loan does to your debt coverage
Debt service coverage ratio is the cash a business generates before interest, divided by the principal and interest it owes over the same period. Banks use it to decide whether you can carry another loan. Commerce Bank's guidance for borrowers puts the typical conventional floor at 1.2, and the SBA's standard 7(a) rules in force since 1 June 2025 require 1.15.
Say the business produces $186,000 of operating cash before interest and pays $143,000 a year on its existing loans and line. Coverage is 1.30. Add the truck loan at $982 a month, or $11,784 a year, and the denominator becomes $154,784. Coverage falls to 1.20, exactly the floor, and a second truck puts the next annual review on a different footing. A lease payment does not sit in the debt service line, though a careful lender will ask about it and some will add it back. The full mechanics are in debt service coverage ratio for business owners, and line of credit versus term loan explains why a truck belongs on a term loan and not on the line.
Trucks in a separate LLC
Owners with several companies often put the trucks in their own LLC and lease them to the operating company at a monthly rate, mostly to keep the fleet away from the operating company's liabilities. The accounting consequence is less discussed. The operating company's margin drops by the lease charge and the equipment company shows a profit it did not earn from any customer. Added together, the group has counted the same $2,150 a month as revenue in one company and expense in the other, and the total means nothing until that charge is canceled, which is the mechanism explained in intercompany transactions. A bank looking at the operating company alone sees a thinner margin than the family actually earns.
Navigator reads each QuickBooks Online file read-only and shows every entity and the group side by side, refreshed daily. On the Pro plan you can add a truck as a lease payment or a loan schedule to the 13-week cash plan and the rolling 12-month forecast and see coverage against your own loan terms before you sign, and the equipment company's lease charge to the operating company is canceled in the consolidated view. Each additional entity is half price; plans are at navigatorhq.ai.
Questions owners ask
Is it better to buy or lease a truck for my business?
Buy if you will keep it more than five years, drive it hard, or want it on the balance sheet as something you own. Lease if you replace vehicles every three years, stay under the mileage cap, and would rather keep the down payment for something else. The tax deduction is larger and earlier when you buy, but the cash leaves sooner, and the loan payment counts against your debt coverage.
Can I write off a truck in 2026 under Section 179?
Usually, if it is used more than half for business. For 2026 the Section 179 limit is $2,560,000, phasing out above $4,090,000 of equipment purchases, and 100 percent bonus depreciation applies to property acquired after 19 January 2025. A pickup with a bed of at least six feet or a cargo van is not subject to the $32,000 heavy-SUV cap. Vehicles under 6,000 pounds are limited to $20,300 in year one.
Does a leased truck qualify for Section 179?
No. Section 179 and bonus depreciation apply to property you own. On a true lease you deduct the lease payments as you make them, along with fuel, insurance and repairs, in proportion to business use. If the lease is really a financed purchase dressed as a lease, with a nominal buyout at the end, the IRS may treat it as a purchase, so read the buyout clause before assuming either treatment.
What is the 2026 IRS mileage rate?
The 2026 standard mileage rate for business use is 72.5 cents a mile, up 2.5 cents from 2025, per the IRS release of 29 December 2025. It replaces actual costs and depreciation, so you cannot take Section 179 on a vehicle you run on the standard rate. A leased vehicle on the standard rate must stay on it for the whole lease, including renewals.
Should my trucks be in a separate LLC?
An equipment LLC that owns the trucks and leases them to the operating company can limit liability and make the fleet easier to finance separately. It also moves profit from the operating company to the equipment company, which changes each entity's margin and taxes, and adds a set of intercompany charges that have to be booked on both sides every month and canceled when you look at the group as a whole.
Related
Before you sign, see what the payment does in debt service coverage ratio for business owners and where it lands week by week in the 13-week cash flow forecast. If the truck will sit in an equipment company and be leased across, intercompany transactions explained covers how to book it on both sides.
If you want to see the truck payment against your own cash and loan terms before the dealer calls back, the trial connects in about fifteen minutes and needs no card: navigatorhq.ai.
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Published . Last updated . Reviewed by a CFO on the Navigator team.