Big time financial decision - looking at several trucks

Discussion in 'Trucker Taxes and Truck Financing' started by jpeters72155, Sep 17, 2014.

  1. jpeters72155

    jpeters72155 Light Load Member

    219
    18
    Sep 17, 2014
    0
    Hi everyone, this is my first post on the forum. Here are the usuals:

    Sorry if I posted this in the wrong section
    Yes I did use the search function first :]
    It didnt give me good results hence this thread

    I love forums, I used to be on them a lot when I was in my early 20s and even hung out with some of the guys at a BBQ or two.
    I am not a trucker myself but my uncle is and I love the guy. I'm extremely driven to help the co. succeed.

    Anyway, I handle all the financials and large financial decisions for a small trucking co based in Souther California. We have been in busn for about a decade but only until recently has there been a need to get a lot of new equipment. I have spent a lot of time researching semis, engines, mpgs as well as leasing vs purchasing but man, its hard finding info for this industry sometimes. Here's what I would like some help with:

    I've heard that if you need a semi for local work (picking up light to medium weight loads in 53 ft or shorter trailers M-F), you could get an inexpensive, low hp and torque semi and it would be fine. Which ones though... International Prostars look like a good deal but I know to stay away from the Maxxforce engines pre-SCR. What about post EGRs that are using SCR tech from Cummins I believe? Or if not, what about the one's with Cummins ISX engines? Its almost 2015 and want to know if it would be a good idea to buy some used 2013s. If thats a BAD idea, what other day cabs would you recommend? Was also thinking 2009-2012 Freightliner Cascadia day cabs. Any experience with those?

    We also need some sleeper trucks for long haul and I have read mixed reviews on a lot of trucks. However, it seems you can't go wrong with Freightliners, Kensworths or Peterbuilts. Unfortunately, we cant afford the last two new because we need 3-4 day cabs + 1-3 sleepers. Any recommendations on specific models or engines? Will be hauling dry freight 150,000-200,000 miles/year.

    Which brings me to my last 2 questions. I've talked to a private leasing co that does full service leasing but only on Peterbuilts. They are saying the co should have about $500k in equity (total assets above total debts/liabilities in order to get a 2-3 yr lease on 2 (two) $134k Peterbuilts (day cabs). I know this is way too much for what we need right now but using that as reference, can I expect the needed equity to pretty much be double the value of equipment being leased? Ex: Trying to lease 4 day cabs worth $40k-60k each would mean a needed co. equity evaluation of $320k-480k? Ryder just told me they lease semis as old as 2010. We'd only consider going that old on sleepers if 1/ they are CARB compliant 2/ good engine 3/ full service lease. If anyone has leased from Ryder, it would be great to hear your experience.

    I do understand a regular lease and how it compares to a purchase. Basically, you are paying interest on a lease on both the residual value and the net lease cap cost (cap cost minus any cash down payment and cap cost is the MSRP minus any discount off msrp). With a loan you are paying interest on the MSRP minus any discounts off msrp and any cash down payment. Since the loan's payments are meant to pay off that entire amount, purchase payments are usually higher than on a lease for the same vehicle but lease payments include higher interest per month which means more overall in interest Anyway, I've heard 10-20% down for a purchase is typical with average to good credit. Do you guys agree?

    Sorry for the lengthy post but to whoever can offer advice, even if it covers just a part of whats above, thank you!
     
  2. Truckers Report Jobs

    Trucking Jobs in 30 seconds

    Every month 400 people find a job with the help of TruckersReport.

  3. jbatmick

    jbatmick Road Train Member

    2,184
    2,441
    Dec 1, 2009
    hastings, Fl
    0
    Have you considered out-sourcing to owner operators ? No capital out-lay, no looking for drivers,less head-aches and possibly cheaper than you could run a small fleet. Commie-fornia is a hard state to truck in.
     
  4. jpeters72155

    jpeters72155 Light Load Member

    219
    18
    Sep 17, 2014
    0
    Hi jbatmick, yeah we actually do that already but dont have a large network or efficient enough business systems yet to outsource all of our work. On top of that, we are getting work a bit faster than we can probably find trustworthy and reliable O/Os. I agree, CA is extremely expensive. CARB is the main reason we need to upgrade almost everything around the same time.

    I see that you've been trucking for 39 years, that's amazing. Do you have any recommendations on possibly which trucks to consider for either local work or long haul? Thank you
     
    humalag Thanks this.
  5. G/MAN

    G/MAN Road Train Member

    7,031
    8,621
    Sep 3, 2010
    0
    Any of the major brands of trucks will do what you want. Volvo or Freightliner (nothing with a longer nose) will have a shorter turning radius for local pick up and delivery and getting into tight spots. I am not sure if you are asking about conventional financing or leasing. There are several leasing companies that finance class 8 equipment. There was a company in southern California called 4 Points Capital that used to do equipment financing. All of the major brands have their own leasing and conventional lending programs, such as Paccar, International Harvester, Chrysler Credit or Mercedes Credit, etc., You will usually get better rates with your own financing. Most banks will make commercial loans and have commercial lines of credit. Those can sometimes offer better interest rates than other types of financing. Much of your options for this type of financing will depend on your financials and history.

    Financing is usually easier with new equipment, but you can buy more trucks for the same money when you go a few years older. You are somewhat limited to buying newer trucks due to CARB in your state. You can usually get into a lease with less down, but may have a balloon payment at the end, depending on your contract. Most dealers can assist in finding financing. With conventional financing a down payment of 10-20% is the norm. If you lease you may get into the deal with only a first or first and last lease payment.
     
    jpeters72155 Thanks this.
  6. jbatmick

    jbatmick Road Train Member

    2,184
    2,441
    Dec 1, 2009
    hastings, Fl
    0
    Well, it depends a lot on distance to local dealerships. No use in buying / leasing a unit if you have to take it 100 miles :Straight road:to get it fixed.
    My thoughts are ;
    Every make and model has it's plusses:biggrin_255: and minuses:puke:. Some drivers prefer X, some Y, some Z. All makes are good , and all are bad. :smt102
    Repair shops :Monkey wrench:at the dealers can make or break a trucking business. Make sure you have access to one with a good reputation.
    Often, lease companies / or dealerships will offer 'deals':Transportation cost on certain models, as they may be over-stocked. Take advantage of these if found.
    Once word gets out you are looking for trucks, offers will come in quickly. :smt041Get the word out.
    Hire the best drivers you can afford. Do not try to save money on cheap drivers. :smt065
    If I were spec a fleet out, Freightliner would be my recommendation, I think. International would be a close second.
    Engine choice would be a coin flip, hoping for the Cummins to win. Detroit close second.

    Buying trucks is a gamble. Seems like you do your homework, so the odds will be in your favor whatever you decide.

    I am sure others will dis-agree:smt021, just my thoughts.
     
    jpeters72155 and walterjacobo15 Thank this.
  7. jpeters72155

    jpeters72155 Light Load Member

    219
    18
    Sep 17, 2014
    0
    G/Man, yeah I didnt know the major manufacturers did their own financing and leasing. I was talking about conventional financing where you take a loan for the full value of the equipment and leasing where you either hand the unit back or can buy at the end. I see leasing companies that are tied to just one manufacturer as a sort of dealership and figured going straight to the source would be cheaper interest wise but I guess not according to your post.

    I have thought about approaching the bank but I was hoping to get an idea of what a balance sheet should look like or what a profit margin should be at for them to really even consider someone. I get the feeling from brief talks with a couple of big bank reps that banks dont take trucking companies seriously or dont see them as big business opportunities.

    Thanks for confirming the 10-20% down as the norm. You think I should avoid International for day cab work?
     
  8. G/MAN

    G/MAN Road Train Member

    7,031
    8,621
    Sep 3, 2010
    0
    Lenders each make their own rules when it comes to lending. But, some things have changed since the crash. Lenders seem to require more confirmation of financial information, such as tax returns. They may also require the last couple of years bank statements unless you currently do business with them. Nearly any loan for equipment will require a down payment. The main reason most banks don't like trucks is due to the high failure rate. Banks don't like to repo equipment. Some banks will make commercial loans but don't make truck loans. You can still use the loan for equipment, but they don't call them equipment loans. Terms can also be more favorable for a commercial loan. A line of credit might also work and terms are flexible. A balance sheet should show consistent growth and profit sufficient to service any debt. Don't expect the bank to lend when the balance sheet shows you will use up all the profits to service the debt. You can probably get a commercial line of credit that is equal to about 10% of your gross revenue, depending on the lender. As I said, some things have changed since 2008.

    I would not avoid International for over the road or day cabs. A International with a short wheel base would work just fine. But, International is not known for their tight turning radius. But, a short wheel base tractor with any brand should work with a day cab. I think Old Dominion runs a lot of International day cabs. I have owned Internationals and had excellent service.
     
  9. Blu_Ogre

    Blu_Ogre Road Train Member

    7,629
    43,820
    Jul 14, 2013
    Out west
    0
    jpeters72155 Thanks this.
  10. jpeters72155

    jpeters72155 Light Load Member

    219
    18
    Sep 17, 2014
    0
    Yes, I definitely do homework. I was new to the trucking industry about a year and a half ago. I've poured my soul into trying to figure everything out from DOT regulations, CARB, average truck resale values and longevity, operations and managing drivers, the full on accounting analysis. Right now I'm focusing on the accounting side since we hired new help but bc my busn partner/uncle buys equipment on mostly a gut feeling, thorough equipment research is needed. I should have been on the forums months ago!! I used to be on them all the time in my youth

    You have any idea on how to check whats overstock at a dealer or leasing company? A lot of dealer or lease websites only show a sample of whats in stock. Maybe just asking them outright.

    I agree about the drivers. We have even slowed growth until we find more really good drivers. And I'm glad you agree on Cummins and DD, Freightliner and Int. Overall sources will point to that but knowing that its coming from someone with that much trucking experience is great. Thanks for your response btw
     
  11. jpeters72155

    jpeters72155 Light Load Member

    219
    18
    Sep 17, 2014
    0
    This is really useful info that probably would have taken hours to find out. Thank you! Now I understand why banking reps arent exactly waiting for my call back. That and the fact we don't have a website, not DUNS registered yet (which is what one leasing company pointed out and what Penske requires), have a residential address as the registered address, etc but that stuff is going to change as we grow.

    I'm supposed to talk to a BoA rep soon and I'm going to tell him we aren't just looking for an equipment loan. Its true, we'd like to expand operations and need cash to hire more ppl and more office space.

    And thanks for the heads up about the balance sheet. The balance sheet doesnt look great bc we have dug ourselves out of debt from '09 '10 slowly but surely. Maybe they will notice the good trend from '11 to now and see that as favorable enough.

    And about the Internationals. Have you heard any good or bad from the ones with Maxxforce engines using SCR tech? I've read nothing but bad for the ones from like 07-12 or so because of the Maxxforce EGR issues. I should probably just stick to Prostars with Cummins or Cacadias with DDs, haven't read much negative stuff on those.
     
  • Truckers Report Jobs

    Trucking Jobs in 30 seconds

    Every month 400 people find a job with the help of TruckersReport.