Define Your Needs
Every driver or business has different needs. Before diving into research on financing options and their terms, take some time to determine what you need or want. You can start by asking yourself questions like these:
- What kind(s) of trucks do you need or want for your business?
- Are you looking for a single truck or more than one?
- Do you need to buy new, or is buying used an option?
- What are the market prices for new and used versions of what you need?
- If you’re deciding whether or not buy, would having assets on your books help with other business needs?
Assess Your Position
Borrowing money to finance trucking equipment is normal for drivers, owner-operators and fleets with varying degrees of creditworthiness. The rates you’ll pay will depend on your credit, the age of your business and the condition of the truck you want to finance. As with personal credit, you’ll likely find it easier to borrow if your business has a good financial track record to show lenders. A less-than-perfect credit score doesn’t exclude you from financing though.
Depending on how long you’ve been in business, you may only have a personal credit score available to share with lenders. If this is the case, consider whether you have a regular record of on-time commercial debt payments. A history of timely and full payment in your records will go a long way to secure the financing you need on agreeable terms.
Another thing to consider is whether you have time to improve your record before financing trucking equipment purchases. Would it make more sense to lease in the short term while you build up your credit? How much might you be able to set aside for a down payment to show lenders that you’ll be a model borrower?
Assess the Market
Once you’ve defined your business needs and properly assessed your creditworthiness, the next step is to determine which type(s) of commercial truck you need and set you a budget that fits within your means. While factors like age, model and configuration will all determine the overall price, you should also pay close attention to recent truck market and pricing trends.
For example, an increase in new authorities during the pandemic led to higher demand for commercial trucks. This increase in demand, combined with supply chain issues, led to lower inventory levels and caused prices to spike. In the years since, prices (particularly for used trucks) have steadily decreased as the freight market experienced a recession and many of those authorities left the industry.
Knowing when it’s the right time to buy is important to help ensure you stay within your budget. When you’re looking to finance trucking equipment, be sure to pay attention to current trends within the new and used truck markets. Doing so can help you find opportunities that don’t interfere with your long-term financial goals.
Know Where to Look, and What to Expect
Unlike other forms of financing, equipment financing for trucks is typically only available from specialty lenders familiar with the industry. The good thing about this is that you’ll be applying for, and receiving financing from, an entity that understands the risks and rewards associated with your specific business. This does mean that rates could vary widely across lenders, and they may be less tolerant of missed payments or difficult circumstances. Be sure to shop around to find a lender that’s right for your business.
Weigh Your Options, Make an Informed Decision
Ultimately, drivers or business owners looking to secure equipment financing will want to balance all the above in deciding what truck(s) to finance, at what cost and rates and for how long. The pros and cons of different options will depend on your present and future needs, your assets and projections (including the state of the market) and your creditworthiness as a borrower. Just know that there are several financing options available that are specific to equipment and truck financing. Do your research to make sure you find the right lender for your needs.