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What Expediters Should Know About Truck Financing

When it comes to purchasing an expediter truck, negotiating the best price is just one-half of the equation; the other-half has to do with financing. And that’s where many first-time expediters get tripped up because they don't know what to expect.

What do commercial truck lenders look for? How much of a down payment should you have in the bank? How can you prepare your finances and credit to qualify for the best possible financing terms?

John Lalonde, expediter truck sales representative at Buckeye Western Star in Plain City, Ohio, shares these points to consider.

Financing Term
How long should you finance the truck?

“A truck is a tool for your business and not something you're going to hold onto and cherish forever,” says Lalonde. "Eventually, it's going to wear out, and you'll need to replace it. And dollars and cents wise, you can only depreciate that truck on your taxes for so long. So, at some point, you’ll need to get it off your books because you can't write it off on taxes anymore."

And that means you don’t want to finance the vehicle for too long—beyond, say, four or five years or so, depending on the age, make and model of the truck, says Lalonde.

“You might be able to go to your hometown bank and finance a used truck for 75 months, but the problem is that truck might wear out in two to three years if it's used. At that point, you'll owe more money on it than it’s worth. And now, you’re in trouble. You’re making payments on a worn out truck and can't afford to get out of it. You want a financing term where you can afford the payments, while still paying down the loan in a relatively short period of time so that you’re building equity," says Lalonde.

Credit History
Your credit impacts how much truck you can buy, what interest rate you qualify for, and how much cash you’ll need to put down.

But truck financing companies are looking at more than just your credit score. “Lenders also want to see ‘comparable high credit,’” says Lalonde. "In other words, you could have an 850 credit score, but if the only credit you’re showing on your report is a $1,000 credit card, your score isn’t very helpful to the lender. But when you can show 'high credit,' where you have a track record of paying on bigger loans, such as a $200,000 home or $50,000 car, that gives lenders a better picture of your creditworthiness for a larger truck purchase."

Down Payment
How much cash should you expect to put toward your down payment on an expediter truck?

"For a first-time buyer, the down payment could be around 10 to 20-percent in most cases, with as low as 5-percent for those with strong credit and driving history,” says Lalonde. “In the last year or two, I have seen down payments range anywhere from zero to 25-percent."

Driving History
Most truck lenders typically like to see at least a year or two of driving experience, according to Lalonde.

But if you’re new to the expedite business and don’t yet have driving experience, that doesn’t mean you’re completely out of luck when it comes to qualifying for truck financing.

“The expedite community is unique in that it's made up a lot of retired people who are looking to become first-time owner-operators,” says Lalonde. “And lenders will sometimes look at these folks and think, 'Well, they just retired from such-and-such career after 25 years; they’ve shown they are pretty stable, so we'll look at them as a first-time buyer.' But a 21-year-old who has worked at seven different food joints, that's a different story. Lenders like to see driving history, but they’ll make exceptions for someone who has good credit and stable work experience."

The Bottom Line
By knowing what to expect, you can begin today to put yourself in a stronger position to qualify for the best possible truck financing when you’re ready to take that next step to ownership.