If you’re one of the brave who’s ready to step into the trucking industry, the biggest investment is buying a truck. Your equipment choices will impact your trucking career for years to come. A truck purchase requires careful research into the make and model, but also into the financing.
What Kind of Truck?
We can’t make that decision for you. Often, truckers just move into what’s the most common: dry vans. These trucks haul all kinds of loads from one side of the country to the other. You’re not locked into a particular type of freight. That flexibility increases the number of loads the driver can take, but at the same time, there is a lot of competition for those loads, which keeps the pay down.
Specialized rigs have fewer loads, but can get better rates.
So you decide what works for your truck purchase for your future.
If this is your first truck purchase, we have advice.
Don’t buy a new truck.
Like a car, as soon as you drive a truck off the lot, it’s value drops significantly. You can’t sell a 10 minute old truck after you purchase it for the price paid.
So, from our experience here at TruckingOffice, we recommend your first truck purchase to be a used vehicle.
We don’t have a preferred method, however. There are truck sellers who specialize in selling used vehicles. You might find one for sale out of a garage or barn. If you know a trusty mechanic, they may have a line on a vehicle that’s for sale.
That’s not a bad way to buy a truck, especially if you can get them to vet the truck first. A complete check of a rig might required some pay, but it’s worth it to avoid buying a pretty cab with a bad engine.
Do your research before you purchase any truck.
Carfax may have a report for a semi truck. RigDig has truck history reports. Read up on the history of the models that you’re interested in. Maybe there’s a year you need to avoid or a year to look for.
How to Finance a Truck Purchase
Generally, we have to borrow money to purchase a truck because those things are so expensive. (See above when we say buy used.)
Let’s break those finance choices into three options.
- Borrow from family, friends, and your local bank or credit union.
- Borrow from a national finance company.
- Lease Purchase contract from a trucking company.
The Bank of Mom
Sometimes it’s hardest and easiest to get money from family for a truck purchase. (We hope you have a history of paying back loans faithfully.) We suggest avoiding guilt, begging, and nagging. Instead, show your family your experience in the trucking industry, how it’s helped you make informed decisions, and a payback plan that you can afford.
The same with your friends. If you have people in your life who may be willing to support you in this dream, ask them politely and honestly for the money you need. This works better when you’ve got a sizeable investment yourself. Borrowing 100% of the money you need to finance a truck purchase looks… sketchy. 😕
Your Local Bank or Credit Union
If you’ve got a bank account or savings account at a credit union, then they know you. If you’ve got a credit card with them, they’ve got a history of your financial decisions. You should definitely look into their financing plans. You might find a great deal that you can live with. If you find out about a local bank that does offer financing and you’re not a customer, consider changing banks to let them see how you manage your money.
National or Regional Loan Companies
During a recent trip through Florida, I saw several flyers for loan companies that will help you finance your truck purchase. Or your tractor. Maybe your dump truck. (Or maybe your airplane. Not kidding!) These loan companies exist to help small businesses like yours to grow. Applications can be filed online and you’ll get an answer quickly. You might want to fill out an application early to have everything in line when you’re ready to make your vehicle purchase.
Why We Don’t Recommend Lease Purchase from a Trucking Company
Back in the bad old days, companies would build housing for their employees and move them in. The companies built the stores for the employees and their families to buy food, clothing, and all their needs. This process often ended with the employees owing their employers more than they earned.
We are not saying that all Lease Purchase programs are like the old company town scam. Go talk to some truckers and you’ll hear stories that go both ways. This trucker will have had a great experience with their lease purchase truck. That trucker lost everything when the company nickel-and-dimed him off the road with punishing fees, required loads that didn’t pay enough, and required service vendors who may not have always been telling the trucker the truth about repairs.
Be very careful. That’s all we’re saying.
If you’re thinking about a lease purchase, consider these things.
- Are you required to take all loads from the company? Can you negotiate better deals when what they offer is a bad deal for you?
I hate to say it, but there are entire trucking companies that make their profits off the backs of newbie drivers who have signed a lease purchase agreements. The company doesn’t allow them to turn down loads that cost the drivers money to haul. Over time, the number of loads decreases, reducing the trucker’s income to the point that they owe the trucking company far more than their lease agreement contract states.
- What fees didn’t they mention?
Read your contract. Make sure you understand everything.
Do you have to use a specific vendor for repairs? What if you’re miles away from that vendor when there’s a breakdown on the road? Are you paying to be hauled to a repair shop miles away when one is at the next exit on the highway?
What about fuel? Are you locked into a fuel purchase card that you don’t want to use?
Insurance is required in the trucking industry. Do you have options or do you have to pay the (possibly inflated) fees through the leasing company?
Are there leasing fees or balloon payments you need to consider? What surprises don’t you know about?
Will your total investment with fees and interest rates be more than the value of owning your own rig?
Read the fine print. Get someone who can explain the contract to you – who doesn’t work for the lease purchase company.
Good luck with your new truck purchase. And keep us in mind when you’re ready to get on the road for your ELD or your trucking business management software. We’re here to help!
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