Finance Your Used Semi Truck
Purchasing a used truck is one of the most important decisions you’ll make when starting your own trucking business. When most people think about buying a used commercial truck, they immediately think about the act of looking at, test driving and selecting the truck that’s right for them. While that is, of course, an important part of the process, there is another critical step to securing a used semi truck: used truck financing. Let’s take a look at several factors lendors think about when considering a loan.
Character
The character or integrity of the buyer is always considered. One of the best ways to predict if a customer is going to repay a debt is to review their credit report and look at how they have paid other debts in the past. The lender will review history of debt payment and whether such payments were regular and in line with the amount owed. They will also look at whether or not the buyer has any bad debt, back taxes or child support payments owed. If some of these factors are not in the buyer’s favor, they can opt to add a co-buyer or guarantor in order to try to secure used truck leasing or loans. Most lenders are able to work with difficult credit situations; however, this can lead to a downpayment percentage as high as 25 to 40 percent.
Down Payment and Collateral
Another category that a lender will consider is the down payment you can provide for the used semi truck, which will be your collateral for the loan. Down payments for a used commercial truck usually range from 10 to 20 percent of the purchase price. Some lending companies and used truck dealers have special programs with low down payments to help drivers get behind the wheel. For example, SelecTrucks offers special programs to match your down payment up to a certain amount. Even so, it is critical to practice careful budgeting to help you set aside money for your down payment.
Driving Experience and Business Structure
A lender wants to know about your experience as a driver, as well as your anticipated business structure. Do you have CDL driving experience already? Will you be operating under your own authority and be able to find loads to keep you busy? Or, will you contract with a carrier for your business? A potential lender wants to make sure you will have adequate business to not just make your used truck payments, but also be able to sustain yourself and your family.
Capital
Also to be considered is capital. The lender will look at the net worth of the buyer’s tangible resources. What the lender is trying to determine is whether the customer has sufficient resources to run their business and pay their used truck loan and all other debts and obligations. Additionally, does the customer have enough capital to survive when markets are soft and still continue to make loan payments? SelecTrucks salespeople suggest that customers need about $0.15 to $0.18 a mile for at least the first four to six months of ownership to cover shop expenses and down time. Financing versus using cash for your used truck purchase can be helpful because that cash can be used to provide a buffer for these unexpected expenses. Interested in learning more about capital? Reach out to the F&I Manager at your local SelecTrucks center for more information.
Economic Conditions
A lender looking at used truck financing will also review the economic conditions in which the buyer is operating. Lenders examine the current market as well as the competitive landscape to determine whether the conditions can support the financing. They will also try to identify any threats to the business, as well as measures the buyer has taken to protect the business from potential risks. This can impact the interest rate, term and down payment needed to secure the loan.
Pre-Approval
More and more lenders are offering a pre-approval process for used commercial truck financing. A pre-approval from your financial institution for a used truck loan helps set the stage for the truck and payment expectations. Since you’ll know the price range of the truck that you can afford, you can search for it with confidence.
Expertise
Having an expert who can structure a loan that works within your parameters is essential in securing used truck financing. At SelecTrucks, we have dedicated finance and insurance managers who partner with each of our customers to better understand their business. Through our preferred finance partner, Daimler Truck Financial, as well as our other financial partnerships, we take the time to understand your particular situation so we can offer flexible used truck financing to meet your needs.
Find a SelecTrucks Center near you to get started.