Financing of Commercial Trucks
Financing a commercial vehicle, or semi-truck, is a lot different than personally financing a home, or car. Commercial lending, especially for a first-time truck buyer, can often be confusing and frustrating, but it does not have to be.
You can search online, ask sales persons and other truckers about the process, and will likely get a different answer from each. The reality is that there are nearly as many answers to the first-time buyer’s questions as there are lenders. When preparing to make that first financed purchase, get yourself organized and be prepared for the questions that you will have to answer.
The primary things that you will need, and be asked for up front, could include:
- Do you know your current credit score? This information helps to steer your application in the right direction
- Have you ever purchased a truck? Was it financed anywhere (including lease-purchases?)
- Do you own a home, or have you lived in your current home for at least five years?
- How long have you had a CDL, and how long driving a truck?
- How much down payment do you have? Be realistic and honest with this one.
- Where will you be operating the truck (who are you leasing to?)
- Bank statements: usually the three most recent months will need to be provided.
There are too many variables to discuss specifics in this forum, but understand that the financing for a first-time truck buyer will look a lot different than purchasing a home, or a vehicle for personal use. The risk that lenders take on commercial trucks is much greater, so they require different financing. Down payments are typically higher, ranging from 10-to-50 percent depending on credit history and the truck being purchased. Loan terms vary, as well, from a conventional loan to Trac leases. Trac leases will usually have a residual or final payment, due at the end of the contract. Interest rates will be higher, too.
It is always a good idea to purchase an extended engine and after-treatment warranty when available for your truck and some lenders will require this as a stipulation to financing a used truck. This is separate from the required insurance that will be needed on the truck.
Finally, be realistic with your expectations. You may not be able to purchase that $70-80,000 truck right now. Remember, to finance a truck, it should have under 700,000 miles, and less than 7-8 years old. Be flexible with your specifications and understand that all trucks, engines, and drivetrain combinations have their benefits. Your salesperson really is interested in getting you in the right truck that will serve you well.
When all aligns, questions are properly answered, and requested documentation is provided, the process can actually run pretty smooth. Being handed the keys and driving away in the truck you purchased as you start your new business makes it all worthwhile.
The sales team at MHC Truck Source works with customers and lenders everyday, we have over 1000 trucks to choose from including Sleepers, day cabs, medium duty trucks for just about any application. Let us know what you need, and give us an opportunity to help.