Commercial Truck Financing
There’s no denying the fact that buying a commercial truck can be a fairly expensive proposition. Very few people have the necessary cash on hand to purchase a truck outright, which can cost as much as $100,000. Because of the hefty price tag, most trucking companies and fleet operators use various financing options to fund their purchases, paying back the loans over a period of time.
We've gathered up everything you need to know about commercial truck financing. If you have any questions, call us at Draco Isuzu Truck Center in San Diego, California, to talk to our friendly staff about how to successfully get the funds you need!
Overview
Businesses often use commercial loans to buy vehicles, like trucks, for work-related operations. When you consider the cost of these loans and your financing options, you’ll find that the interest rates are higher as compared to a personal auto loan. Additionally, whereas banks are your best bet for getting a personal vehicle loan, they don’t lend to most truck operators, because they consider it as an expensive, risky investment. Luckily, there are many other lenders focused entirely on truck financing. These loans are available for buying or leasing a new or used truck, as well as for repairing or upgrading your existing heavy-duty vehicle.
Loan Types, Rates and Terms
A commercial truck loan is a form of financing that can be used specifically for the purpose of buying equipment. The equipment itself serves as collateral for the loan, and the terms and amounts are often directly related to the cost and expected lifespan of your purchase. Keep in mind that as the truck is collateral, it can be repossessed if you default on your loan.
Financial institutions usually charge annual interest rates ranging between 5% and 30%, which depends on the borrower’s credit rating, the financial state of the business, and the type and condition of the truck. These interest rates are usually fixed, so you’ll have to pay a fixed monthly amount over the course of anywhere between two to fifteen years based on your loan’s tenure.
Figuring Out the Total Cost
Make sure that you can afford the monthly payments for the loan you want for your truck. This will involve doing some calculations on your part to figure out the interest that will build up over time. Don’t forget to factor other costs, like the application fee, credit check charges, and the appraisal fee to evaluate the fair market price of the truck. These can significantly impact the cost of your loan, so you’ll want to ask the lender about the annual percentage rate of the loan to find the actual cost, which includes all fees. Check your loan terms carefully and make sure that you understand your obligations before you sign on the dotted line.
Your Options
Although you have several options when it comes to commercial truck financing, it’s often difficult for small business owners to qualify for loans from local banks. However, there are many large national banks offering these loans, but you’ll likely need a great credit score and a huge down payment. This option is still worth exploring, considering that banks offer the lowest interest rates and longest terms.
Specialized truck financing companies and online lenders are other good options you’ll want to consider. They charge higher rates as compared to banks and tend to provide shorter terms, typically less than seven years. The advantage here is that there will be fewer qualification requirements, a simpler application process, and you’ll probably get your funds quickly.
We hope this guide helps you to invest in a high-quality truck that meets all your needs. If you still have questions or want assistance with the financing process, call us at our dealership in San Diego, CA. Our staff will be happy to help with the commercial truck financing options we offer and make the right recommendations. Draco Isuzu Truck Center welcomes all our patrons from San Diego County!