If you have ever tried to get a loan, you know the process can be stressful and confusing.

 

This page will provide some basic info on what to expect throughout the process.

 

First, let's talk about...

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Online Lenders vs. Bank Loans

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Traditional and community banks are your best option for getting a car loan; however, these banks may be reluctant to lend to equipment buyers, especially those in the trucking industry. 

 

That is because of the risk of the asset and the risk of the business failing.

 

Many owner-operators fail due to truck breakdowns or lack of discipline in running a small business. 

 

However, all is not lost when seeking an equipment loan; some options specialize in this kind of financing. (Like us!)

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Keep in mind, should you secure a loan, you likely will be paying higher interest rates than what you would see for a personal car loan.

 

A car loan may hover around 5%, but you could see anywhere between 5% and 50% interest rates for certain types of trucks. 

 

Depending on credit and your experience, this same percentage could be required for a down payment as well. 

 

As you can see, there is a vast range that each applicant may fall into, thus making it vitally important that applicants arm themselves with as much information as possible before accepting a loan.

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Let's dive into what you can expect when looking for financing for your new piece of equipment. 

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What To Expect

 

As with most assets, rates and terms will largely depend on your:

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• Credit score & history

• Business experience 

• Type of risk the lender is willing to take on. 

• Type of equipment

• Age of equipment

• Your story

 

These will factor into what rates and down payment you may see. 

 

Loan Terms (the time to pay it back) for over-the-road (OTR) used trucks will typically max out at 48-60 months. You may see longer terms for vocational or construction equipment.

 

Vocational trucks can be viewed as less risky than OTR trucks due to them being used within a predictable region or working within a certain mileage per day.

 

Long-haul trucks have many miles and can be viewed as higher risk due to maintenance, repair cost, and the possibility of them being located anywhere in the US at any given time.

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In addition to rates, many finance companies will charge fees when closing a deal.

 

These fees could include: 

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• GPS fee

• Application fee

• Admin fee

• Credit fee, etc. 

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Each lender will have its fees, so be aware of these as they can play a part in the overall cost of your loan. 

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Underwriting Process 

 

It all starts with credit, experience, and the asset! 

 

If you have owned a trucking company for years and have outstanding credit, you can likely secure a loan through a bank that offers commercial truck financing. If you can qualify for this, you will see the lowest interest rates and longer terms available.

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Most lenders will want to know what asset you are trying to purchase before applying for any financing like:

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• Make 

• Model 

• VIN

• Year

• Mileage/hours 

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All will be necessary to close a deal with any lender.

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Purchasing Best Practices

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When it comes to OTR, you really should be looking at something that is less than or equal to 6-7 years old and no more than 600,000 miles. 

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There are not many lenders who will take on older equipment. 

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It is also fairly common for lenders to want up to see some cash in reserves to be on hand should you encounter unexpected repairs or setbacks.  You also will need to show bank statements showing consistent income especially if a first time buyer.

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If driving a truck for two years and possessing a score above 630, you likely will have good options without seeing that 40-50% down and rates to match.

 

Most of these lenders will be based online. 

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First-time buyers 

 

If you are a first-time buyer, you are a much different ballgame as you will likely have to consider online sources to find a viable option.

 

If you have bad credit and have never purchased heavy-duty equipment in the past, it may prove challenging to get approval at all.  Even though the truck serves as collateral in a loan, it will not protect you from getting approved with high rates and unfavorable terms.

 

Your best bet is to consider partnering with an honest broker who can find you options and hopefully find you the best deal out there.  Many may secure a loan with the intent of paying off early or refinancing down the road, this option can be a good choice if disciplined in your actions.

 

Having this consultant-type relationship may help you understand the process and how it all ties together. 

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Generally, commercial finance companies will prefer you buy something through a reputable dealer vs. a private party.  Private party sales are doable deals, just be prepared for a few different requirements.

 

Trucks that come to a dealership from a fleet may have maintenance records to ensure that the truck is sound.

 

You also will want to find a piece of equipment that is reasonably priced as a lender will not extend themselves to a point where the deal makes little sense.

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Additional Requirements for All

 

Regardless of your experience or credit, there are some things that lenders will expect.

 

You will need to secure truck insurance before closing on your truck loan. 

 

This will include:

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• Liability 

• Physical damage

• Likely bobtail coverage for non-trucking use

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Help For Any Situation

 

It can be challenging and time-consuming to find the perfect financing for your upcoming purchase.

 

Ultimately, it is best if you work with someone who understands your options and is not afraid to share those without personal gain. 

 

Here at Wheelhouse, we do our best to get you into equipment through direct lending and relationships with others. This enables us to help in almost all situations. 

 

We are consultants in that we provide you real information to feel comfortable making your own purchase decisions.