Financing Your Equipment
If you’re buying a new truck, before negotiations begin ask each dealer to provide a complete breakdown of the vehicle price, showing the list price for the chassis and every spec option, applicable taxes, transportation and dealer prep costs. Ask about dealer add-ons, such as delivery charges and predelivery services, that could crop up after you cut the deal. Make sure your down payment or trade-in is included in the order.
Also, be sure your dealership is able to service your vehicle and that warranty work and downtime will have the least possible effect on your driving time and miles. Get warranty agreements in writing and make sure you fully understand them. Ask how warranty work is reimbursed.
BEFORE YOU SIGN
Get full disclosure before you sign a finance contract. Make sure the total price is clearly defined. Truth-in-lending laws do not apply to commercial loans, such as truck financing, so dealers do not have to give full disclosure, but most will if they are asked.
• Don’t sign anything you don’t understand.
• Get a copy of everything you sign.
• When trading, don’t sign over the title of your truck until you take delivery of the truck you’re buying.
• Don’t sign a finance contract until you have a ready source of revenue. Make sure you can put your truck to work within a few days of leaving the lot.
• Don’t automatically include insurance in the final contract. Shop around beforehand, and you might opt to buy it elsewhere.
• Don’t sign up automatically for credit life or credit disability insurance, which covers your truck payments if you die or become disabled. You likely can get the same type of policy on your own at a much lower rate.
• Make sure all requested repairs are completed to your satisfaction.
SHORTER LOAN, CHEAPER TRUCK
The ideal loan term for a three-year depreciable asset like a heavy-duty truck is three or four years, during which you can reap the tax benefits of depreciation to maximize the affordability of the monthly payments.
New truck: $118,000 at 7.5%
Loan term length/years 3 4 5 6
Monthly payment $3,120 $2,425 $2,010 $1,734
TOTAL VEHICLE COST $130,018 $134,107 $138,289 $142,562
CARRIERS WITH LEASE PURCHASE PLAN
Lease-purchase plans are popular paths to truck ownership, particularly among operators with otherwise shaky credit, but some carrier contracts make it difficult to generate enough revenue to meet payments. Appealing to nascent operators who have few financial resources or less-than-sterling credit histories, the contracts may require high weekly payments, maintenance accounts or end-of-lease balloon payments.
They generate the most controversy for practices that favor the company at the expense of the owner-operator. Common complaints include mileage manipulation in the latter stage of the contract and unadvertised fees and charges.
But another approach practiced by some carriers is centered around developing an owner-operator base and helping contractors develop their businesses. Do diligent research on the carrier and analyze the lease carefully.
If you have questions after reading the contract, consider hiring a lawyer or financial adviser to review it. Make sure items such as down payment, weekly or monthly payments, maintenance escrow account, length of contract and what you’ll owe at the end of the agreement are spelled out.