4 Myths About Buying a Commercial Pre-Owned Truck
Maybe you’ve been a trucker for 2 months or 20 years, or you have never been behind the wheel of a big rig. At America’s Truck Source, regardless of how much time our customers have spent in the business, we find that buyers come in with the same misconceptions when looking to purchase their next truck. Before you explore your commercial truck financing options, here are four things to consider:
1. The Older the Truck the Less Money I Need to Put Down
Many times, an older truck will be less expensive so first impressions would appear that the down payment would be less than a newer more expensive truck. This will inherently bring on more risk for a bank, therefor they will not want to tie up their money for an extended period of time. Banks are evaluating every lending opportunity as a risk reward investment. In general, for banks to mitigate their overall risk on older trucks, you should expect shorter loan terms resulting in higher payments and larger down payments.
2. It’s Just Like Buying a Car
Purchasing a commercial vehicle is actually a cross between buying a car and a home. The lending process typically takes a few days or up to a week and will require some form of bank and/or tax statements. Commercial loans are considered a business investment by a bank. Operating under an LLC is a good rule of thumb. Showing your ‘time in business’ can make all the difference for a bank when evaluating your ability to operate a business.
3. I Don’t Need a Warranty or Roadside Assistance
America’s Truck Source is honest with every customer when we say, it is not a matter of if you will have a breakdown but when. Repair cost for a turbo on a truck can easily run $5,000 or an engine replacement can be north of $25K and having that safety net can keep you in business. If a breakdown does happen, it’s important to follow the warranty guidelines for claims and repairs. Roadside Masters offers coverage of a free tow for both the truck and trailer up to 50 miles. The last thing you want is to leave a full load on the side of the road in the middle of a haul. Keep in mind that an emergency tow DOES NOT include a tow from your home. It is always best to coordinate with your warranty company to identify a qualified repair shop and have roadside assistance take your vehicle directly.
4. A CDL or Good Credit is Enough to Get a Loan
Purchasing a commercial truck is equivalent to starting your own business. Commercial lenders expect more from individuals than just having their CDL. They want to see that an individual is responsible and can handle multiple lines of credit. Having multiple open sources of credit like a home loan, car loan, credit card, etc. will show that a prospective borrower is able to juggle different sources of credit. In addition, the number of years of driving and years with active LLC are heavily considered. However, what can be the most impactive is an individual’s cash reserves and monthly cash flow, which are not even calculated in your FICO scores. Knowing that you will be required to present three months of bank statements, it’s important to set yourself up for success by establishing a business account with your LLC and regularly deposit your earnings every month so the banks will be able to verify your income.