Semi and Commercial Truck Financing

Contrary to (some) popular belief, driving a semi or commercial truck can indeed be lucrative. Granted, there are a lot of variables that need to come together to make this happen, but commercial trucking is a growing industry despite the thought that autonomous driving would eventually render a physical human from driving a truck obsolete. When considering the financing aspect, most companies will offer leasing and leasing-to-own options. The startup cost of purchasing these vehicles is high, so many folks who want to get into the game will get started as owner/operators.

The first thing to understand is financing a truck (commercial) is very different than financing a car. Auto loan interest rates vary of course, but in general we’re talking 5%. A business auto loan rate for a semi-truck however is anywhere from 5% and 30%. Banks are usually the first stop for auto loans, but you’d be hard pressed to find a bank interested in shelling out financing for a semi or commercial truck loan. The primary reason is the trucking business is prone to revenue swings. High default rates don’t make it attractive for traditional banks to jump in. But the good news is commercial truck financing exists and finding it is not difficult at all.

Commercial truck financing is available for buying, leasing or repairing and upgrading a new or used truck. To qualify however is very different than a traditional business loan. Personal credit score, the company’s revenue and time in the business are all the most frequently asked questions. Trucking is a specialized industry where the truck serves as collateral for the loan. This will minimize the risk for the lender which results in most borrowers qualifying, at least initially. Over the sector at large, the best borrowers will typically qualify for 100% financing with interest rates that get close or match an auto loan interest rate. Borrowers with “red flags” however can expect to put money down at signing coupled with rates that could reach the 30% territory.

Because the truck itself serves as collateral, the condition of said truck will affect your financing options. You can finance a used truck but be sure it is fewer than 10 years old and ideally has less than 600,000 miles on it. A lender will tend to shy away from you if the truck you’ll be occupying is not expected to last the duration of the financing. Lastly, one can also lease, and the two most frequent leases are capital and operating leases. With the latter you are renting the truck for the full term of the lease which means the truck is not showing up on the balance sheet of the company. Monthly payments are lower but at the end of the lease you will have to purchase the truck to own it. With capital leases, these work more like loans and at the end of the lease the truck is yours. This structure is like a loan, but the lender will call it a lease for accounting purposes.

Again, if you are driving a lot and hauling value, this is a good industry to jump into. Be sure to thoroughly investigate all the options and consider what type of financing works best for you.