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Are you a new owner-operator looking to get your business going? If so, you’re going to need at least one truck.

But you may not have the money to purchase one outright — and that’s okay. With the cost of commercial trucks being hundreds of thousands of dollars, it’s totally understandable if you need to apply for commercial truck financing.

What you do need to know is how commercial truck loans work.

At the most fundamental level, commercial truck financing helps owner-operators buy new or used rigs for their trucking businesses. Commercial truck financing is also necessary for trucking company owners who need to repair and upgrade their current fleet.

But commercial truck financing is a pretty unique type of financing that comes with its own rules. So, what does a commercial truck loan really look like? Here are three things you need to know before you fill out that financing application:

1 – A Down Payment is Typically Required

Both commercial truck loans and equipment loans give you a lump sum that you can use to purchase a new or used truck or equipment.

However, both commercial truck financing and equipment financing typically require down payments — a percentage of the value of the truck. Whatever you don’t pay in your down payment, the lender will make up for in the truck loan.

As an example, you could be offered 80% of the value of the commercial truck, with the expectation that you’re making a 20% down payment.

While the term of the loan is determined on a case-by-case basis, it can be up to the expected lifetime of the truck. In other cases, the loan may have a 10-year term, even though the lifetime of the truck is longer.

Interest rates on both equipment loans and commercial truck financing are typically fixed so you can expect to make the same payments month to month.

Once you pay off your commercial truck loan, you own the truck outright.

2 – Know the Type of Truck You Need

There are many types of commercial trucks. The distinction is important, especially to commercial truck lenders, because the type of loan you qualify for can depend on the type of truck you’re trying to buy.

When you say you want “commercial truck financing,” you’re probably thinking of semi-truck financing. However, commercial trucks are typically broken down into two categories: transportation trucks and vocational trucks. Transportation trucks are typically semis, which carry more financial risk to lenders. Other trucks like construction trucks, tow trucks, dump trucks, delivery trucks and so on are vocational trucks, which carry less financial risk.

The long-haul component of semi trucks involves more “wear and tear,” making the financing of that type of truck a bit riskier for lenders. More miles driven means more repairs and more upkeep issues with the semi truck. Plus, if your semi truck suddenly is out of service for any period of time, you won’t be bringing in as much income. These are all risk factors that your lender will consider.

In short, because a commercial truck lender is loaning you money to make one, big purchase, they WILL look at what kind of truck you want, what you will be using it for and the condition of it.

  1. Find the Truck You Want Before You Apply

Unlike most small business loans, commercial truck financing requires some upfront prep work.

You’ll need to have a specific truck in mind before you even contact any commercial truck lenders.

Lenders look at 1) the type of truck you’re purchasing and 2) who you’re purchasing it from. These two elements will have a large impact on what your rates will be, and how much your down payment will be. Generally, you’ll want to find a newer truck sold by a dealer, less than ten years old and with less than 700,000 miles on it.

When you apply for commercial truck financing, you may be required to provide the lender with the following details about your truck:

  • Make, model and serial number
  • Year
  • Mileage
  • Used or new
  • Condition report
  • Photos of the truck
  • Specify if it is sold privately

It Pays to Do Your Homework

To launch a trucking business, owner-operators need trucks. And trucks are expensive. You need straight answers to your financing questions so you can make plans on what you’ll need to allocate for your business. Making the wrong decision about your truck purchase can affect your business’ success, so spend some time researching and talking to financing sources that can explain everything to you clearly and completely. Don’t forget to check out the loads on (FFS). Our online load board is fully integrated with a freight bill factoring company, so you can find freight, obtain a fuel advance and secure 100% funding within hours. Register on our free load board today.

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