Higher Down Payments

[FinanceGuy]

Good Morning Everyone,

One thing that everyone needs to be prepared for when purchasing a truck is the higher down payments that lenders are requiring now. Because the lenders had so many trucks go into default over the past few years they are looking for larger down payments to give them more equity in the truck and a greater level of comfort that they would be able to sell the truck and recover most or all of their capital.

Has anyone experienced a larger than expected down payment request recently?

Finance Guy

 

[paullud]

I know you had used the term trucks but as far as getting a van which I just purchased I had a lower down payment than expected. I got the loan through Wells Fargo and they tried to give me more than what the guy I was working with requested for the loan. My wife's credit score and mine are both in the mid-670's according to Transunion so they are not horrible but not great either.

 

[Brisco]

I know you had used the term trucks but as far as getting a van which I just purchased I had a lower down payment than expected. I got the loan through Wells Fargo and they tried to give me more than what the guy I was working with requested for the loan. My wife's credit score and mine are both in the mid-670's according to Transunion so they are not horrible but not great either.

Just a quick question.....

Did you and your wife purchase that van for use here in the Expediting Industry?

If so, is the loan in your personal names and considered a personal loan for that vehicle? (Basically it is since Wells Fargo stopped loaning $$ for commercial vehicles last year)

Again, if so, be careful using that van in a commercial capacity, OK. You have a strong clause in that personal loan agreement that clearly stipulates "No Business/Commercial" use of vehicle.

For the last couple of years, both Wells Fargo and Capital One have been the 2 biggest banking institutions that are still loaning money for vehicles. A lot of guys who were trying to buy new trucks for their businesses have been getting turned down by "commercial lenders", so they've been going to traditional personal financing to buy new trucks by putting the trucks in their personal names instead of their business names. No problem there, but when they go get their vehicles covered with commercial insurance, the insurance companies are sending "commercial use" binders to these lenders.

I know the guys over at Commercial Fleet Financing.com, and they have been averaging a good dozen or 2 new customers a month trying to find financing for them for trucks they just bought a month or 2 ago because Capital One and Wells Fargo are calling their loan contracts due and paid in full now because of breach of contract. Most of the people they've been trying to work with have either just gone with the personal insurance route, using the truck in their business at a huge risk, or just turning the trucks back when CFF can't get them a commercial loan.

So, read that contract carefully. If your adding that van to a company policy, or buying into the commercial binder most Expedite Companies provide, Wells Fargo WILL find out about it.

You'll be in a lot of financial pain if you wreck that Van some 1500 miles from home and the Insurance Company and your Lien Holder (Wells Fargo) start comparing notes on why that Van was where it was at when the wreck happened, what the Van was being used for, and what was in the Van. Insurance could deny claim, Wells Fargo will want the money instead of the wrecked van, and so on.

 

[paullud]

It is in our names but I did not see anything that says it cannot be used for commercial purposes and I did tell the guy that was doing the loan it was going to be used for a business.

 

[Deville]

If the van is insured for a total loss than the insurance company HAS to pay. They can't cherry pick there claims.

 

[cheri1122]

If the van is insured for a total loss than the insurance company HAS to pay. They can't cherry pick there claims.

True, but if there is a clause such as Brisco cited regarding "noncommercial use" buried in the fine print, they certainly can and will refuse to pay.
Question is, did Paullud read every bit of the contract?
It aint easy, I know - even when you understand every last word, the sentences run on until they make no sense at all, and a lot of surprises can be hidden that way.
I'd be interested to know for sure, either way.

 

[greg334]

There are two different issues, one is the loan agreement where in many cases says "not for commercial use" and insurance where a lot of policies will not pay out claims if they have a commercial rider policy as part of their offerings. On top of all of that, they don't have to pay out the full claim either. There are a lot of cases depending on the state, the insurance company will assess the vehicle damage, come to a determination of the fair market value and pay accordingly - this happens by the way with a lot of older cars like muscle cars where the value exceeds the actual insured value. IN addition, many seem to forget that not everything is covered in the insurance, like stereo/XM radio, laptops, A/C units and so on. This is where the owner needs to be proactive and document everything on the van.

 

[TeamCaffee]

When we purchased our truck we found the down payment to be what we had expected and were prepared to pay.

I know that until we had a credit check and were approved for a loan the talk of a down payment was not discussed.

If we had a low score or were looked at as a risk the down payment was going to sky rocket. Another thing I found interesting is that OOIDA will no longer finance Expediters no matter what the down.

 

[moose]

. Another thing I found interesting is that OOIDA will no longer finance Expediters no matter what the down.

Yes, as i understands it, OOIDA changes it's skins.
it used to be they will do the credit check, and then let a few lenders fight for your business. looks like that well dried.
according to LL Mag, they now in business to help selected lots clear inventory.
they also advertise a new no money down option, which is flat out wrong, as this what got us to the mess we are in to begin with.

 

[paullud]

Question is, did Paullud read every bit of the contract?
It aint easy, I know - even when you understand every last word, the sentences run on until they make no sense at all, and a lot of surprises can be hidden that way.
I'd be interested to know for sure, either way.
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I am not going to lie and say I read every word of the contract but it was made clear to the guy doing the financing that it would be used for business by my wife and I. I looked through the contract to check for any business use issues but found none. If I hear otherwise I will mention it here.

 

[ATeam]

Another thing I found interesting is that OOIDA will no longer finance Expediters no matter what the down.

This fits with what a dealer told me a few days ago. Lenders who are willing to finance expediter trucks are requiring higher down payments because expediters are more difficult to move if they are reposessed. It's easy to get rid of a tractor. The market for expediter straight trucks is smaller. The dealer said lenders took biger losses on expediter trucks than on tractors in recent years so bigger down payments are now required, if money is being made available at all.

 

[cheri1122]

I am not going to lie and say I read every word of the contract but it was made clear to the guy doing the financing that it would be used for business by my wife and I. I looked through the contract to check for any business use issues but found none. If I hear otherwise I will mention it here.

I hope it doesn't become a problem, but if it does, it's something potential buyers should be made aware of - and I can't see "the guy doing the financing" risking the sale by pointing it out.

 

[pjjjjj]

I am not going to lie and say I read every word of the contract but it was made clear to the guy doing the financing that it would be used for business by my wife and I. I looked through the contract to check for any business use issues but found none. If I hear otherwise I will mention it here.

Not trying to scare you or make you feel bad, but you might be surprised what the guy taking the money is willing to turn a blind eye to, and lead the buyer to think it won't matter. Unfortunately the guy taking the money isn't in a position to decide what matters to all of the other entities involved (ie FMCSA, Carrier, Insurance, etc.)

 

[BillChaffey]

If this is\was a "Personal" loan and not a "Auto" loan what or how they spend the money is none of the lenders business. A Auto loan may have conditions on what the vehicle can be used for along with a lien against the vehicle. A personal loan is personal, there should be no lien against the rig.

 

[skyraider]

This fits with what a dealer told me a few days ago. Lenders who are willing to finance expediter trucks are requiring higher down payments because expediters are more difficult to move if they are reposessed. It's easy to get rid of a tractor. The market for expediter straight trucks is smaller. The dealer said lenders took biger losses on expediter trucks than on tractors in recent years so bigger down payments are now required, if money is being made available at all.

so are they saying ( the lenders ) have a grave yard of straight trucks somewhere.

 

[coppertone]

Good Morning Everyone,

One thing that everyone needs to be prepared for when purchasing a truck is the higher down payments that lenders are requiring now. Because the lenders had so many trucks go into default over the past few years they are looking for larger down payments to give them more equity in the truck and a greater level of comfort that they would be able to sell the truck and recover most or all of their capital.

Has anyone experienced a larger than expected down payment request recently?

Finance Guy

Are they requiring larger down payments for just straight trucks or can you put possibly 10% down if buying a big truck. I was thinking maybe a big truck has more freight options therefore a finance company may not feel it is more of a risk. My husband and I are debating between a S/S or T/T.

 

[BillChaffey]

You may want to clarify with OOIDA on what they do & do not finance. Back in April there is a post on the Fiance Forum page from Team Caffee that OOIDA would not finance a "Straight Truck"

 

[layoutshooter]

Are they requiring larger down payments for just straight trucks or can you put possibly 10% down if buying a big truck. I was thinking maybe a big truck has more freight options therefore a finance company may not feel it is more of a risk. My husband and I are debating between a S/S or T/T.

I would suggest 20% instead of ten. I would also suggest that you have AT LEAST 6 months personal AND business expenses in the bank. A year of each would be better. If things go south with the economy you are going to need it. Things are shaky right now, be careful.

How long have you been in the business? Have you been driving for an owner?

 

[Monty]

I have financed my purchases through Freightliner, and Diamler.

I paid zero down, (prefering to work on THEIR money and not not mine), with an effective interest rate of less than 10% on each one.

Of course I have owner operator experience dating back t0 1985, no one has ever lost one red penny in our dealings. And my credit score remains close to 800.

 

[mcavoy33]

If the van is insured for a total loss than the insurance company HAS to pay. They can't cherry pick there claims.

True, but if there is a clause such as Brisco cited regarding "noncommercial use" buried in the fine print, they certainly can and will refuse to pay.
Question is, did Paullud read every bit of the contract?

Your talking insurance here though, which I'm pretty sure Paul has commercial insurance.

There is no clause in a auto loan agreement that would prevent an insurance company from not paying out.

If Paul explained it to the salesmen who arranged the loan, then as the loan officer, that salesmen would have to ensure its compliant with the terms of the loan.

I met with a salesmen the other day and we had to end the process because the finance company that he got me approved with wouldn't finace a vehicle for me unless it was the only vehicle I have. I wasn't willing to trade in my other vehicle so we couldn't work it out.

As agents of the loan company, the salesmen have certain obligations (or the finance dept).