Tips for Acquiring First-Time Commercial Truck Financing

commercial truck financing

When deciding to purchase a commercial truck, financing it may be your best option. New trucks can cost $80,000-$150,000 each, which may be out of the reach of most operators.

If you have made the decision to purchase your own tractor and trailer, congratulations. Being an owner/operator in the trucking industry comes with a lot of rewards you cannot get working for a major carrier.

Be aware though, commercial truck financing is expensive.

A decent used tractor will start at about $60,000 and go up from there. New tractors are more expensive than a house, so before you quit your job make sure your finances are in order.

Can you afford the down payment? Can you afford the monthly payments?

Let’s find out.

Credit Habits

Before seeking financial arrangements, some basic loan guidance will be helpful.

Individual credit habits will affect loan applicants differently. Persons with decent credit, say a credit score of 660 or greater, usually are able to find financing. On average, a 15% down payment usually translates to an 80% loan success for those with decent credit, although sometimes lower down payments can be found.

For those with poor or no credit, some alternative options may be found here. These options may also benefit those with a new business, low cash reserves or those wishing to purchase older vehicles.

Some of these circumstances have been known to make financing more cumbersome.

Vehicle Age

Vehicle age should also be evaluated prior to financing. Vehicles 10 years old and newer have little trouble finding financing.

Trucks 10-15 years old are slightly more difficult to finance but usually do find financial backing. However, trucks older than 15 years are more prone to breakdowns and are harder to resell so financing them can be difficult.
Vehicle types can also affect financing options.

Vocational trucks, like dump trucks, are more easy to finance than semi trucks. Some institutions will refuse to finance semi trucks while others specialize in these types of loans.

Type of Operators

Fleet operators are also preferred over single truck operators when seeking financing. If a single truck owner has any vehicle downtime, he is unable to earn until his truck is repaired. A fleet owner, however, can still generate income with his remaining trucks, if one is down for repair.

Financial institutions have been known to use this as a determining factor when considering loans.

Bankruptcy

Past due child support, current bankruptcy or recent vehicle repossession can all be red flags preventing you from securing financing. Discharged bankruptcy generally is not an obstacle to finding adequate financing.

So when you’re ready to leap into the trucking business National Truck 8 Equipment Sales has you covered. Whether truck sales, parts, service or repair we have something for you.

How to Purchase Your First Truck

You should have good credit and a good work history.

When you go into the process with a less than average credit rating and a spotty or short work history, you can get hurt on the interest rates and the size of the down payment.

When you finance a vehicle, at the end of the loan term you own it outright. You are responsible for all taxes, insurance, and maintenance.

Financing a vehicle will improve your credit rating as the years go by, as long as you make payments on time.

Different Types of Commercial Truck Loans

There are a lot of different truck loan types. The type of truck and its age are considerations. There are companies who make loans on commercial vehicles to people with poor credit.

There are companies that make loans on vocational (dump trucks, cement trucks) only, while some companies finance both vocational and OTR. Do your homework and find the interest rates and financing structures that work best for you.

The most important aspects of financing a commercial truck:

1. How much will the down payment be? You should be able to get a clear and concise answer to this question. If your credit is good or the machinery is newer, you may not have to make a down payment at all.

2. How much will my monthly payments be? Again, this should be an easy answer for the salesperson. You have to find payments that work within your budget or you will run into trouble.

You Can Also Lease a Truck

Depending on your financial/credit scenario, you can lease a truck. You can lease a tractor from an independent leasing company, or lease with an option to buy from a carrier.

Leasing can be far less expensive than financing depending on factors like the age of the equipment and your work history. Generally, you don’t have to make a down payment and the monthly payments are less expensive than financing.

This is a good alternative for people with bad credit. At the end of the lease term, you might have to pay a sizable amount of money if you decide to purchase the truck.

Things to Know When Leasing

You need to know who is responsible for repairs and maintenance. In the event of an accident or emergency, who is responsible? Who pays taxes, insurance, and fees?

Assess a lease contract as carefully as you would a loan contract.

Section 179

Are you looking to add a new or used truck to your fleet, or are simply considering the purchase of your first truck?

There is not much time left in 2018 to make a purchasing decision that could potentially benefit you and your company well in the form of tax write-offs.

Section 179 is a tax write-off for any new or used medium or heavy duty truck purchased in the 2017 calendar year.

If you’re trying to decide whether or not you want to purchase or lease, this may very well affect your decision as this tax measure allows business owners to write off $500,000.

Obviously, with the potential to write off half a million dollars, this can have a very big impact on your overall equipment costs.

Reliable Commercial Truck Financing

Buying a truck comes with a lot of financial responsibilities.

Make sure you are capable of taking them on. Don’t be so rushed that you walk into a financing structure that will crater your finances.

When you are ready to find out more about commercial truck management, please contact us.