A truck is an owner-operator’s biggest business purchase, but savvy spec’ing and shopping can save plenty.
A truck is an owner-operator’s biggest business purchase, but savvy spec’ing and shopping can save plenty. Here are seven truck-buying tips that you can drive all the way to the bank.
“Name your price!” says TV pitchman William Shatner, and millions of happy Priceline customers do just that when lining up airline tickets and hotel rooms. Too bad that’s not an option when buying a big rig. Or is it?
“My goodness, these things do cost a lot of money, don’t they?” says Howard Abrams, owner of PBS Tax and Bookkeeping Service in Tarzana, Calif.
Faced with the daunting necessity of buying a truck – new models costing more than some people’s houses – owner-operators can indeed assert some measure of control over their single biggest business expense, says Abrams and other owner-operator business experts. If you can’t quite name a price, you can devise a business plan that states upfront how much you’re able and willing to pay. A variety of other sound business practices can help ensure the best price at the lowest interest rate – not just for your next truck, but for all your trucks after that.
- DO THE MATH. The thousands of owner-operator clients of American Truck Business Services in Denver spend on average 15 percent of their gross income on truck payments. An additional 5 percent goes to trailer payments.
When figuring an annual truck payment you can afford, “try to stay below 25 percent of your gross income for the year,” says former owner-operator Russell Fullingim, now owner of Truckers Financial Services in Corning, Calif. “Remember that another 25 percent will be spent on fuel, and once you’ve done that, there’s not going to be much left for anything else.”
Using this formula, an owner-operator who expects a gross income of $130,000 might set $32,500 as his maximum truck payment for the year, which works out to $2,710 a month. As your parents used to say of your allowance, however, you needn’t spend it just because you have it.
If you just had your best year ever, don’t budget your new truck on the assumption that the next five years will be just as flush. One of Fullingim’s clients had an unusually good year in 2005, with $300,000 in income, “and you wouldn’t want to spend 25 percent of that,” he says.
Instead, peg your payments to the reasonable income level you have come to expect yearly. Even if you run a consistently high-income operation, it’ll be even more profitable if you refrain from overspending on a truck.