Ultimate Guide to Semi-Truck Financing

October 19th, 2022

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Text, "ultimate guide to semi-truck financing," written above a truck with a price tag

In the commercial trucking industry, a reliable fleet can make or break your profit margin. The other side of that coin is that new semi-trucks cost between $100,000 and $200,000. This is why most trucking companies take out loans to cover their equipment costs.  

If you want to maintain a fleet of vehicles or your own truck, there are a number of things to consider. 

Think about what type of truck you want to buy.  

Is it better to buy a new or used truck? What specifications do you require? Do you require a single truck or are you building up your fleet? How you intend to pay for the truck(s) will also matter. While some buyers can purchase a truck with cash, many need to consider semi-truck financing. 

So that you don’t go into this process blind, let’s show you how to finance a semi-truck. 

What is Semi-Truck Financing?

Semi-truck financing is when you take out a loan to purchase or rent a new or used truck. Commercial trailer financing can also be used for trucking equipment or repair work. 

In order to learn how to finance a semi-trailer, you need to understand that it differs from obtaining a standard loan. Truck loans are more expensive and need a larger down payment than commercial or auto loans. Your semi-truck loan installments will be determined by your FICO scores, trucking industry experience, length of time in business, haul references, homeownership, the kind of vehicle you want to buy, as well as your lender. 

Purchasing vs Renting a Semi-Truck 

A semi-truck can be purchased or financed. Understanding the differences between buying vs renting a trailer will help you determine which route you want to take.  

Purchasing a Semi-Truck

You can buy a truck with your money, personal loans, credit cards, and other alternative methods. Trucking is a high-cash-flow business that may provide you with a steady monthly income. Because a semi-truck costs an average of $165,000, purchasing a commercial vehicle can deplete your business’s working capital or strain your personal budget. In addition, it is important to make sure that your truck is covered by a warranty and insurance. 

Semi-Truck Financing

A truck loan allows you to start or develop your transportation business with only a portion of the purchase price as down payment. Borrowers with good credit or mortgageable assets may qualify for low-interest rates. A title loan can also be obtained by mortgaging an existing vehicle as security for new semi-truck financing. In the event of a default, you may lose your truck and assets to repossession. Make an emergency fund to ensure that your loan payments are made consistently and on time. 

The Difference Between Banks and Online Lenders 

There are several funding options for semi-trailer financing. Some of the options include banks (that offer business checking accounts) and even online lenders to purchase your vehicle.  

You may benefit from an existing business relationship with a bank, which makes it easier to get approved for a loan or possibly get a rate reduction. The approval process, on the other hand, may take longer. Note: if you don’t have good to excellent credit, you may face some challenges with commercial trailer financing. 

Meanwhile, an online lender may process your online application faster and accept you even if you don’t meet the semi-truck financing requirements at your bank. 

Working with your dealer may give you the best approval odds and rates, as they can shop your loan to multiple lenders on your behalf. 

Image that lists the benefits of semi-truck financing: tax advantages, lower upfront cost, and convenient ownership

Benefits of Semi-Truck Financing

Your financial status and needs will determine whether you purchase or finance your semi-truck. To best understand how to finance a semi-truck, check the semi-truck financing requirements and benefits: 

Tax Advantages

With semi-trailer financing, you can take advantage of tax breaks based on asset depreciation. 

Lower Upfront Costs

There are no fees or down payments required to obtain a pre-approval. Once you have a pre-approved semi-truck loan, you can work with truck dealerships and have confidence in your agreement and repayment schedule. 

Convenient Ownership 

Every payment you make on your semi-truck loan adds to your equity in the asset. You will eventually become the sole owner of the vehicle.  

Tips for Choosing the Best Semi-Truck to Finance 

Regarding which option to go with, it’s important to ensure that your truck is not a high-risk investment. Here’s our recommended criteria to stand by and protect your capital when investing in semi-trailer financing. 

Consider Your Needs

It’s critical to evaluate rates, terms, and conditions before choosing a truck. Remember what you need and what you want out of the truck. Do you like how the truck rides? Are there any features you must have? Make sure you’re getting the most out of the investment in semi-truck financing. 

Enquire the Truck’s Age

Look for a truck that is less than 10 years old. Older trucks break down more frequently, resulting in lower earnings and higher ownership costs. Lenders give a high interest rate and larger down payment requirements to reduce this risk. The older the truck you buy, the higher the risk. 

Ensure a Low Mileage

A truck with less than 700,000 miles is ideal. Some lenders will take “asset type” into account. They may impose mileage requirements on the truck you’d like. If it poses a high risk, you’ll likely be charged more upfront. 

Consider Estimated Value

Aside from the cost, the loan terms are also factored into the truck’s value.  

Red truck next to a checklist of semi-truck financing requirements

Semi-Truck Financing Requirements 

You’ll be ready to begin your credit application once you’ve gathered all of the information we have covered above, such as the vehicle you want to buy and your needs.  

Borrowers are frequently asked for details regarding their trucking company, including annual income and time in business. You may also be required to give corporate tax records and other personal information.  

To make sure you’re prepared and meet the semi-truck financing requirements, let’s get you prepared for financing your truck. 

Partner with a Reputable Dealer

Most lenders will only give you credit if you purchase your trucks from a dealer rather than a private seller. Working with a skilled dealer may also provide you with additional semi-truck financing options. 

Have Exceptional Credit Scores

Having strong credit scores can help you receive the best prices. Personal and business credit ratings are important, so check your business credit report before asking for a loan.  

Have a Clean Credit Report

Checking your credit report before applying ensures that your business credit report has no tax liens, repossessions, or delinquencies. These are negative indicators that may make it harder to get an ideal interest rate. 

Be Ready for a Down Payment

Other than having your down payment ready to-go, lenders may require confirmation that you have working capital reserves to fund your loan payment, insurance, and repair charges. 

Secure Truck Insurance

The vehicles you purchase are seen as collateral. Your lender may need proof of insurance before you drive them off the lot. If something happens to the vehicle, their collateral will not be destroyed or devalued. 

Frequently Asked Questions

How long can you finance a semi-truck?

Loan periods vary depending on the lender and your eligibility, but they might range from 24 to 60 months. 

How long does it take to get financed for a semi-truck?

If you apply through a bank, it may take days or weeks to receive an answer to your application. If you apply online, you could hear back within minutes to a few hours. 

How much is a down payment on a semi-truck?

The criteria are based on items including the sale price, your down payment amount, the interest rate, and the terms of your loan. 

Upgrade Your Fleet By Financing

This guide should assist you in preparing for all of the steps required to secure semi-truck financing. If you’ve done your trucking homework, you will get the best deal for your company when financing your next truck. 

Before you make your selections, check in with our experts at Hale Trailer. We have the experience to help you strategize when choosing the right vehicle and equipment. We have many semi-trailers for sale that are ready for any journey. Even if you’re renting or need financing, our line-up is available online or at one of our trailer rental locations. Let us know how we can help you. 

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