Guaranteed Truck Financing Inquiry

Excellent post BigJohn! I don't know where you get those stats but if they actually are accurate, it should be mandatory reading for every person who wants to "run their own business in the trucking industry."

 

Thanks Big Don. I guess I should have made it clearer those stats are my opinion. I base them on my personal experience and information shared by others on this forum. I really believe they are fairly accurate. As an owner operator, I have personally participated in about every catagory I layed out besides the last one (successful beyond your wildest dreams). Fortunately after losing the first truck and gaining wisdom I was better able to see when things were going bad and make course changes so that I avoided the negative outcomes.

 

If I may suggest,,,,,IF you have 20k In cash,,,,put it in a cd or other bank instrument that will pay you interest on the money,,,,,Then borrow the money from the bank to buy the truck for cash and use the instrument as security for the truck loan....That way at least you still have the money in your account and if the job or trucking does not work out sell the truck for what you can get and you might make money or at least break even and not lose money...The cd interest is going to be around 3-4% now and the loan at a credit union will be around 6-9% with the cd security,, I know your not making money on the difference but you havent given someone 20k in cash of your money and hope it works out.

 

If it doesn't work out you're going to lose the same amount whether it is cash or loan. Why would you lose money on a loan? My guess is you would be lucky to get 2% on the CD and 10% on the loan. Besides he needs about half of that for operating capital.

 

try credit unions .

 

Try smaller more local banks. they are easier to deal with.

 

One thing that you need to understand about banks is that they DON'T like to make loans for class 8 equipment. Too many have been burned. BigJohn is right in that there is a very high failure rate in this industry. There is a high failure rate in all new businesses. The rate seems to be a little higher in this industry.


As we can see from the posts on this and other trucking forums, there are many new people who want to own their own truck, some before they even have their CDL. They have not yet earned to ability to drive and don't even know if they will even like this industry, yet want to own a truck. It is rare that I see any post about the steps that they are taking to buy that truck and run their business. Perhaps, that is the real problem. They look it more as buying a truck rather than starting a business.


A truck is only a business tool. Too many look at it as an extension of themselves or their ego. They feel that they must spend $50,000 or more to get a good used truck. And it absolutely, positively MUST have a hood. Otherwise, it won't make as much money. And, of course, it must have a lot of chrome. In reality, you may not even need to spend $20,000 to get a good truck.


The reason the lease purchase programs are so popular is because drivers see it as a painless way to become an owner operator without the accompanying responsibility. If it doesn't work out then they can just walk away. Some will scrape the cash together for a down payment at one of the buy here pay here dealers. If you can put $5,000 or more together, you should be able to find more conventional financing. Most drivers that I see pursuing these programs have poor credit, no money and have no idea how they are going to be successful running a truck. Some recruiter dazzles them with dollar signs and all of a sudden they think that they will be a success because they will have all this money coming in every week. That is not the way it works most of the time. They don't look at what it will cost them to run that truck. Cash flow doesn't necessarily translate into profit or success. I have known of some businesspeople who thought that they were successful and making a lot of money when in reality, they were going broke more with each passing day. They had a lot of cash flow, so they must be successful.


There are other programs where inexperienced drivers can get financed if they can come up with $999 down. Select trucks, which is owned by Freightliner, has had variations of this program for years. It started when Freightliner guaranteed some of the major carrier that they would buy back the trucks at a specified rate when the time came to trade. Well, guess what, when time came to trade the bottom had fallen out of the market and they were left holding the bag with thousands of trucks that they had to buy back for more than market value. Freightliner almost went out of business during that time. I believe that this was a primary reason that they had to sell to Mercedes. Then, someone came up with the idea of selling these trucks to about anyone who could scrape together $999 for a down payment and had only 6 months driving experience. It was a tremendous success. They did put a lot of new drivers into Freightliners. The problem was that the trucks they were selling were going for about $20,000 over current market value. You could go to any Freightliner dealer and buy the same truck for $20,000 less if you had a decent down payment and good credit. Those who bought through the Select program didn't seem to care. They were now an owner operator. Not all of these people succeeded, but enough did that Freightliner continued the program for a number of years. I don't know if they are still doing the program.

Most people, when they want to go into business, will do research and save money to finance their dream. That doesn't seem to be the norm in this business. I am constantly amazed at how many people will continue to fall for some of these programs.


If you want to become an owner operator, then make a concerted effort to learn all you can about owning a truck. Talk to owner operators who have owned trucks for a few years. If you have some dings on your credit, then work to clean up your credit. You will need a good credit score if you want to finance a truck and get a decent rate. Even with a good credit score, it is difficult for first time buyers to secure a loan. If you don't have any money, then start saving from day one. You will need a good down payment and some operating capital.


There are no easy ways in which to become a successful owner operator. For everything we gain, we will sacrifice something. Saving money may mean that you don't go out as often or don't go on that vacation this year. It may mean that you drive an older car rather than buying something new or newer. Everything has a price. I find it amazing that people seem to detest the rich so much. Some did inherit their wealth, but many earned it. They saved, got an education and worked hard and sacrificed to achieve their wealth. Often they sacrificed time with their families and some good times in order to achieve their goals.

A question that I would ask anyone who wants to become an owner operator is "What are you willing to sacrifice to achieve your goal?" When I bought my first truck and trailer I paid cash. I worked and saved my money while I looked around for the truck that would meet my needs. I found one and bought it. I didn't need to worry about financing it. In fact, it really didn't occur to me to finance it. There are others who have saved and paid cash for their first truck. It will take some sacrifice. You may not want to wait until you can pay cash, but you could decide to save something out of every paycheck until you have a good down payment. It is not a good idea to buy a truck without some money saved for emergencies. That is part of the planning process. There are many unknowns when you venture into an unfamiliar area. You won't know what it really costs to operate a truck until you own one. But, there are many resources available and people who are willing to share their knowledge and experience. It is up to you to decide whether you will follow that experience or go it alone and make your own mistakes. There are people who freely share their experience on this and other trucking forums. Most owner operators are more than willing to help others who want to own their own truck. All you need to do is ask. But, if you want to become a successful owner operator, then you will need to decide how you will achieve that goal and be willing to do what is necessary to achieve your goal. Remember, there are no shortcuts.

 

driver do not go to or even bother with those folks, it's bad business and lots of hidden charges. Your 5,000 will increase to about 8,000 by the time they finish with you.

 

i agree with buying a cheaper truck .....as i did that three years ago took me almost a full year to cashflow bringing the truck up to "par"
now it ain;t pretty or chromed out but i have managed to run 350k miles since i bought it with only one real breakdown on the road (turbo) but what isn;t discussed for a first year o/o is the cost of repairs

that one breakdown really opened my eyes while i was upset about paying twice what the repair would cost at home i couldn;t believe how much more the same issue cost in a newer truck almost triple ...could def see how a newer o/o without a proper maint account could go under with payments like that and one or two "minor" mech issues

that being said i did very well in 2011 and still have had to park that truck since december ....i;ll be starting on a shoesting again prob in august once i get my waiver but at least i know this truck and what i have in it would hate to have to start again with a newer truck ...payments or maint issues i didnt know .....but this being said i got this truck for 8000 have spent about 45k on maint in the last two years (mostly the 1st) but wouldn;t trade the experience for anything

 

I think your decision to move forward will largely depend on your ability to put the truck to work. Assuming the knowledge, business management skills, and work ethic are there without a place to put the truck to work (and alternatives if it doesn't work out) you have no business. Being in the truck financing business myself the first thing we ask a potential customer is who will they be pulling for. Without a solid answer to that question our opinion is that they are starting off on a weak foot.

There are dealers out there with legitimate financing plans. These programs are designed to move their existing inventory, move their repo's, or they are an agent for a bank to move their repo's. Yes, there are some bad programs out there but to say they are all bad is being short sighted. Some programs actually work pretty well.

Put a business plan together and, if you feel confident, research this dealer your talking about. Research the BBB, OOIDA, ask for a list of references. Than you will have the information you need to make a decision. Hope that helps.