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The best ways to fund the purchase of your truck

The best ways to fund the purchase of your truck

  • Driving a truck can be lucrative, with salaries averaging almost $60,000
  • The most important thing is to do research before you buy
  • Carrier-sponsored leases can also help drivers get into the business

So you want to purchase a commercial vehicle, hit the open road and see what it’s like to be in business for yourself as a truck driver?

The first questions to ask yourself are:

  • How do I buy a commercial truck?
  • Should I lease, finance, or look for a trucking company that offers a drive-to-own opportunity?

A commercial truck is a valuable asset, and buying one or more of your own could be a business decision that leads to success and profit for years to come. If you do it wrong, it can have the opposite effect.

Take the time to fully research all of the available funding options so that you can make the best decision. Your best bet is to start talking to commercial vehicle lenders, to get a sense of what they can offer you and who you want to work with.

Truck driving can be a profitable business. According to a survey by Indeed.com, the average annual salary for a truck driver in 2019 was $59,098. Salaries tend to be rising as well. According to the Bureau of Labor Statistics, in 2018, just a year before the Indeed survey, the average salary was $43,680, with the top 10 percent making over $65,000.

How much to start a trucking business?

Figuring out the cost to start your own trucking business is a great starting point. According to an article in The Truckers Report, the cab of an 18-wheeler (new) costs between $130,000 and $180,000. A trailer can cost between $30,000 and $80,000. Obviously, used vehicles will cost much less, depending on the year, model, and accessories.

Remember also that a semi engine is built to go a million miles before an overhaul or rebuild is needed, compared to around 150,000 for a car. So if you drive 50,000 miles per year, and with proper use and maintenance, a semi should be good for at least 20 years.

Commercial vehicle financing is different from personal vehicle financing

Unlike going to a car dealer and having your financing right in front of you, commercial vehicle financing is different, but the good news is that you’ve got several options. Let’s take a look at some of them.

Bank loans for commercial vehicles

To start with, it’s important to remember that commercial vehicle loans often cost more than personal loans. This is due to the fact that a commercial loan may be as long as 10 years, so you’ll be paying more interest over the life of the loan. But with an expected vehicle life span of 20 years, you could have 10 years of use after the loan is paid off.

Not all banks make commercial truck loans, but some do. Many truck financing companies also specialize in loans for commercial vehicles. Some offer loans of up to 100 percent of the vehicle value, which eliminates the need for a hefty down payment and frees up more cash-on-hand for you.

Online lenders for commercial vehicles

Online lenders can be a better option for people who have less-than-perfect credit and who may not qualify for a loan from a traditional bank. Chances are it will cost more due to the higher interest rates that come with a lower credit score.

Unfortunately, you will occasionally find less-than-honorable online deals when it comes to truck buying, so it’s critical that you fully check out the companies you are considering. Several sources can help you (i.e., the Better Business Bureau, Consumer Reports) find out about the reputation of the lender. It also helps to get recommendations from others in your particular industry who may have used the lender to see if their experience was satisfactory.

There are also a number of driver advocacy groups that will advise you of any complaints on lenders. These groups include:

  • The American Trucking Associations (ATA)
  • The Trucking Industry Defense Association (TIDA)
  • The National Association of Small Trucking Companies (NASTC)

Should you buy or lease your commercial truck?

Buying and leasing both come with pros and cons. Leasing a truck is like leasing an apartment. You don’t build up any equity, and you don’t own it, but your monthly payments are generally lower than if you had purchased, and your down payment could be lower as well. And while an outright purchase may cost more initially, the IRS allows individual vehicle owners to take a Section 179 deduction in the purchase year. That gives the owner an immediate potential tax deduction.

What is a carrier-sponsored lease, and should you get one?

A carrier-sponsored lease is exactly what it sounds like. Freight carriers work with finance companies to offer lease and lease-to-buy programs for potential drivers (or owner-operators).

There are advantages to these kinds of programs.

In some cases, depending on the contract, there is the ability to own the vehicle outright after a specified amount of time. Some leases also have provisions where the vehicle can be turned back into the carrier should the driver decide that trucking isn’t the way to go.

Of course, situations such as this often have penalties associated with it, so it’s critical to read all the small print or retain the services of an attorney before signing anything.

Commercial trucks are more than just the loan payment

When you are evaluating your financing options, you should remember to factor in all of the other costs of doing business as a truck driver. Fuel, insurance, tires, tarps, tie-downs, and other regular maintenance items are going to be recurring costs versus fixed costs over the life of the vehicle.

Other costs, such as state permits, Unified Carrier Registration, and Heavy Highway Use Taxes, will add to your monthly expense, in addition to your lease or purchase costs. It is best to make a list of your estimated recurring costs in advance so you can budget your expenses more accurately.

Your next step: gather information about your financing options

Buying or leasing a truck is a major investment, perhaps equal to buying a home. You should enter into it armed with every possible piece of information you have at your disposal. It will take time, but doing your homework in advance by contacting banks, leasing companies, carriers, and of course, truck dealers will help you in your quest to secure the best vehicle and the best financing.


Disclaimer: All content and information on this website is for informational and educational purposes only, does not constitute financial, business, or legal advice. Although KeepTruckin strives to provide accurate general information, the information presented here is not a substitute for any kind of professional advice, and you should not rely solely on this information. Always consult a professional in the area for your particular needs and circumstances prior to making any professional, legal, business and financial or tax-related decisions.

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Author


Jeff Miller

Jeff Miller is an award-winning writer in the energy and transportation industries, a playwright and actor/director, and the author of an Amazon Top 100 book. He is certified by the Department of Homeland Security and Michigan State University in Incident Management and Crisis Communications. He and his wife Beth (also a writer) live in Texas.


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