Buying your first truck or buying another truck to start building a fleet is a big expense. Most owner operators don’t have the funds from their trucking business to be able to pay for a truck or trailer upfront. This is where equipment financing comes to play to help you get started. There are great benefits to financing your truck:
1) Cash Money
Cash is money at hand. This is a great concern for any small trucking business owner. In most cases, the cash is scarce and small trucking businesses cannot afford the upfront amount to acquire a truck.
When financing a semi truck, you pay a considerable initial payment, anywhere from 0 to 25+% of the total cost (depending on your credit), and then you pay small monthly payments over an agreed upon period. The total cost paid is usually higher than if one acquired the asset by cash but the monthly payments are more manageable.
Running a trucking business can also be quite unpredictable in terms of unforeseen expenses due to repairs, gas, and miscellaneous expenditure. Repair costs are especially tricky if you intend to invest in a used truck that has outlasted its warranty period. Due to these unforeseen expenses, it would be safer to invest in an investment whose payment is spread out over a long time and you only part with a little amount each month. As such, you generally have enough left for unforeseen costs and reserves.
When you acquire your big rig through semi truck financing, the truck can be immediately classified as an asset although you have not fully paid for it. This means that the depreciation of the truck can be written off against taxable profits even before you can claim full ownership of it.
You may also be able to claim tax relief on the interest charged across the period over which you will be paying for the truck. (Always consult your CPA or tax preparer for advice. We are not licensed tax professionals. You should do your own due diligence before proceeding.)
3) You Still Own the Truck
When financing a semi truck, you still enjoy many of the privileges that would be enjoyed if you had bought the truck outright. You may still use the truck however you want and travel as many miles as you desire.
In most semi truck financing agreements, you have more rights to the commercial vehicle after payment of a third of the total amount. This means that you can return it without paying an extra amount.
Personal loans are another option for financing a semi truck, but semi truck financing is easier to negotiate in almost every case. In our experience, truck sellers tend to be more trusting of semi truck financing companies, than of private banks.
Furthermore, the deposit paid while purchasing an asset by financing are also much cheaper than the deposits one has to part with when using the personal loan approach.
5) Repayment Schedule
When financing a semi truck to acquire your trucking business’ number one asset, you can sit down with the financier and work out a deal where you will pay monthly installments. Similar to buying a car, this is where you negotiate monthly payments that are in line with your revenue and profit.
When you buy a truck outright, you are not confident about how much it will make per month and you may end up with a ‘white elephant’ whereas the money to buy the truck could have been used for ventures that are more profitable.
If you are a professional driver seeking equipment financing for a truck or trailer, we can help you out. We consider all credit scores and new owner operators. You can learn more information here or call one of our financing reps at (866) 224-9958.