Business owners who require a fleet of commercial trucks usually face a myriad of challenges. While leasing trucks and using them in your business is always an option, lease agreements can be incredibly costly. As a result, leasing trucks is only considered a short-term solution. A better solution would be to buy your own trucks. Most trucking businesses started out with leased trucks, but they currently have their own fleet of trucks. Business owners with their fleets of trucks can still lease extra trucks during the high season. Below are truck finance options you may want to consider when you want to expand your fleet:
1. Secured Business Loans
If your business has grown fast, and you now need a few extra trucks to accommodate your growing business, you may want to consider applying for a secured loan to buy the trucks you need. You can use the title to your trucks as collateral for the loan. Most lenders can offer secured loans as much as 80-90% of the value of your trucks. This means that your existing fleet can help you purchase more trucks for your growing trucking business. The extra income generated by the new trucks you buy can service the loan over a period of a couple of years.
If you think this option is great for your business, you should compare the rate of interest charged by different lenders. There is a lot of competition in the industry, so interest rates are often competitive. Therefore, you’ll need to shop around for the lowest rate. The loan terms offered by different lenders together with the loan to value ratio they offer must be considered.
2. Hire Purchase
Hire purchase is one of the many options for buying expensive items, commercial trucks included. It can be looked at as a hybrid of leasing agreements and truck financing. You will be required to pay a huge deposit and make regular payments to offset the difference between the hire purchase price and deposit you paid.
The main shortcoming of hire purchase is that the truck will not be owned by your business until you make all the payments. In case you default, you will lose the truck. After all, the payments you made were simply truck hiring fees.
3. Truck Financing
This is the best option for acquiring additional trucks to add to your fleet. With truck financing, ownership of the truck immediately goes to your trucking business. You will be required to pay a deposit of around 10-20% as down payment. The title to the truck will act as collateral for the loan. This means that you will not need to use the titles to your other trucks as collateral as the new truck will secure the loan. In addition to that, the loan will be serviced fully by the extra income generated by the new truck. This makes truck financing the best option for businesses.
What to Look for in Truck Financing
i) Interest Rate
The interest rates charged on truck financing varies from one financier to the next. While the credit score of your business will affect the rate of interest you pay, it is your choice of financier that will have the biggest effect. It is crucial you shop around to find the most affordable financier.
ii) Deposit Required
All the truck financiers you come across will demand different amounts of money as down payment. Depending on the amount of money you can commit, you should only consider firms that can accept the deposit you have. Please note that the higher the deposit, the lower the monthly payments and interest payment will be.
iii) Loan Term
You may want to stagger the monthly payments over a period of several years or just a few years. Whatever the case, it is imperative you look for a firm with flexible loan terms. Making huge payments can be stressful but will help you clear the loan fast.
It is recommended you work with the best truck finance broker. The ideal broker should have plenty of experience helping trucking businesses get affordable financing. They should be licensed and have a wonderful reputation in the industry. Ideally, you should only work with independent brokers as they will only have your best interests at heart.