Big changes in the financial market tend to make waves. The sub-prime home mortgage meltdown of summer 2007 is no exception, though the surf hasn’t splashed too high onto owner-operator truck financing.Buyers with good credit have come through unscathed, says Scott Anderson, senior vice president with Rush Enterprises, which owns 46 truck centers in 10 states, representing Peterbilt and other brands. Down payments, interest rates and qualifying criteria for low-risk customers are about what they were before the crunch.
It’s the others who might not like what they hear when the dealer rep has finished tapping on his calculator. On the bright side, though, there still are lenders for customers who clock in below A- and B-level borrowers.
“Some financial sources have come in and gotten pretty strong in C and D credit,” says Eddie Walker, co-owner of Best Used Trucks in Fort Worth, Texas, and president of the Used Truck Association.
And there always are certain carriers, looking to groom owner-operators, that will work with sub-prime borrowers. One is C.R. England, where the Opportunity Financial division handles lease-purchases and bookkeeping for 1,700 clients, says Stephen Brinkman. The company will “lease trucks to people who otherwise would not get credit,” he says. Opportunity Financial also provides bookkeeping and advice to help those clients succeed.
In the general lending market, buyers with a credit score in the low 500s should “just about forget buying anything,” Walker says. Those with a rating in the upper 500s or low 600s probably can find a lender, but likely will have to put down 20 percent or more, as opposed to the traditional 10 percent or 15 percent, he says.
Customers with bad credit, many of them dealing with what Anderson calls specialty lenders, are seeing a tighter market – whether because of the mortgage meltdown or other reasons, he says. Consequently, interest rates range from “around 7-ish all the way up to credit card rates” of 20 percent or higher.
A short-haul credit strategy for the long haul
So a string of bad luck has ruined your credit, and the only truck you can afford is a plastic one at the dollar store.
Used Truck Association President Eddie Walker says he has helped clients climb out of a bad-credit hole by taking this approach:
- Be willing to start with a cheap used truck (and a strong maintenance savings plan).
- Bite the bullet on interest rates. “18 or 20 percent interest on a $20,000 truck vs. 15 percent or 12 percent doesn’t mean a whole lot,” Walker says. “Paying an extra $30 or $40 a month over a year’s period – that ain’t much money to buy your health back.”
- Stay on top of your payments and all other debts, thereby improving your credit rating and qualifying you to refinance the loan at a better rate in a year or two. “Some guys did this two or three times,” Walker says. “By the time you go three years, I guarantee you buy three, four, five points back.”