Lets talk about a few options to finance a truck for an owner operator.
The Lease- Option Route-
You see this advertised all the time from big carriers that usually own a dealership, as a complementary business to the Carrier. “Zero down, Lease operator, come today and be a Owner Operator for XYZ Carrier.” These get you in the door, but you get some high payments on a weekly schedule from your settlement. Some can handle it and some cannot. I had one when I first started, driving a 2yr old truck was nice; but $750 a week was not that great. However, it is great to use to get some established lines, that will fall into place for a lender who sees a successful lease payment at those rates a week, and total on the month….The down side, is it is a payment whether you run or not on the week, and taking a few days off– can kill the pocketbook if you are not careful–or the gross rates are not as great as they should be on the road.
You get to drive a new truck for a little more than a new truck payment would cost you. You open the door to learning the business as a Owner Operator, and you get to write off the expense.
Do you make as much money as a owner operator—-NOPE— You really are a glorified Company Driver. But the upside is you get to ride a new truck, many times your maintenance is prepaid at a set rate to the leasing company, and you can become a Owner operator with zero down —– so the lower cost to entry is available. Many let you have a walk away lease option, if you decide you do not like the Lease or company.
Another great thing is the Option– The Option is the right to purchase the Leased truck, for a specific period– typically the life of the lease– up to the end—depending on the terms the buyout could be as low as $1 at the end of the lease.
Some of the traditional commercial truck lenders are coming into this market, be capitalizing on the Lease/Option for financing. They are money makers for those lenders as the Industry is proven they work with Large Carriers, with dealerships under ownership– and Leasing companies connecting in between—typically owned by the Carrier…..for additional money……….
Commercial Truck Financing
Traditional Lenders- Credit based, and many do not like beacon scores below 650; and many want 20% down payment in the deal. This allows a $10k down payment on a $50k truck. This will finance between the 13-18% interest range for standard commercial paper terms to finance from most lenders. This would place your payment in the $1400 range per month which is about half of the basic lease package from a carrier. That is financing $41,500 after docs, and hopefully no sales tax if you run IRP, like in my home state of Georgia.
This give a little more money in-house, but brings full maintenance responsibility home, meaning there is no savings unless you have specific funds set aside, weekly based on miles ran, or percentage.
Now with this option there will be a few hoops minimum that the lenders want to see typically during the purchasing process—
3 months bank statements
Any established lines not on your credit report to show good trade lines with detail history to prove
AT LEAST 2yrs in experience, some want at least 5yrs.
Safe book value for the lenders security…..
Additional operational funds besides the down payment–meaning the down payment does not deplete the bank account so that you do not come back in 3-4 months saying “I aint got any money!”
I have found in recent yrs that a lot of these traditional lenders require you to pay for their GPS to make sure they have eyes on the collateral they are financing……consider this peace of mind for the security of the loan…..
Private Lenders– These are the non-traditional guys… the direct funders. You got to get a few of these guys. You have to respect the ones that have enough respect for the industry that they are willing to fund loans, on anything they consider collateral. I respect these guys highly; they earn higher interest on their money; but they have lax standards and will finance most things as long as they feel confident they get their money, and you follow their standards without much deviation……but remember these are the guys that will change requirements to close a deal….they have don’t have strict policy and will make the deal work for both parties usually for a small fee……
I always recommend finding a few of private lenders in your belt. These guys are not the easiest to find; but they are everywhere if you just get out there and talk to guys….
I push to find these guys because I would rather have a group of private lenders that understand my business and have a personal connection with their client base. I know if there ever was an issue, I could pick up the phone and let them know what is going on, without worry of a strict policy and a bad mark…….They also have a quicker response to lending request because they want to maximize earnings for their account like any other lender—Less Policy Red Tape is always — in my experience — means quicker funds in my account.by