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Truck Loans 101

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Having a fleet of commercial vehicles for your business is one of the best decisions you can make. More than just allowing you to offer more services for your customers, your trucks are also a way to build equity and gain tax benefits.

Truck Loans

However, trucks can be expensive, and it is not always easy to find the money you need to purchase the equipment you want. Whether you want to buy a new fleet for your company or add a single vehicle, getting a truck loan is the most viable way for you to finance your purchase. Truck loans can help you conserve your cash for other business needs, while still enabling you to add vehicles to your company.

Types of Truck Loans for Your Business

When it comes to getting a commercial vehicle loan, you have a few options. Even if your business is brand new, you may still apply and qualify for truck financing. Here are some types of truck loans available:

Commercial Vehicle Loan

A commercial vehicle loan is money that you borrow for the sole purpose of adding vehicles to your company. They become part of your business assets. One of the biggest benefits of taking out a commercial vehicle loan is that you can keep the cash in your business or use it for something else rather than spend it all on a piece of equipment. Moreover, when you are finished with the vehicle, you can sell it and put that money into your business.

Similar to a personal auto loan, with a commercial vehicle loan, you’ll have to pay monthly installments until it is repaid. You will also have to pay interest on the loan amount that you borrowed. That means you will pay more for the truck in the long run than if you purchased it upfront. 

With commercial vehicle loans, the name of your lender will be on the title of the vehicle as its owner. If you default on the loan, the vehicle will become the property of the lender. After you finish paying the loan off, ownership of the vehicle will be transferred to you. That means you’ll be able to decide if you want to keep the vehicle, sell it, or trade it in. 

One of the advantages of having truck financing is there is no mileage limit on the vehicle. That means you can drive it wherever you need to without penalties. Another advantage is that you may be able to resell the vehicle when you don’t need it any longer. You might even be able to use the depreciation on your tax returns, which is an added benefit for your business. 

Truck Leasing

Leasing a truck for your fleet is another way to acquire a vehicle without spending all the cash reserves from your business. It can also be a good business decision, as vehicles have a tendency to depreciate quite quickly after they are purchased. A truck lease is similar to renting out the vehicle, but over a longer time.

One advantage to a truck lease is that you won’t likely be asked for a down payment on the vehicle. This can be particularly helpful if you don’t have enough or if you want to save your business money reserves. Another benefit to leasing a truck is that when the lease is done, you won’t have to deal with outdated equipment. You can also avoid the hassle of having to sell the vehicle when you are finished. 

Just like a commercial vehicle loan, with a truck lease, you will make monthly payments on the vehicle. You will also be limited in mileage, and the lease will run out at the end of its term. Depending on your business, a lease may not be the right type of truck financing. If you need a vehicle to drive long distances, a lease will be too limited. While you can purchase additional mileage for your leased vehicle, it can become more costly than buying a new truck. 

Another drawback of leasing to finance your commercial vehicle is the likelihood you will have higher monthly payments. 

When the lease term is over, you’ll have some options, including:

  • Buy the vehicle by paying the rest of the lease balance
  • Return the vehicle and walk away
  • Lease another vehicle

Alternative Truck Financing Options

There are other ways to acquire the vehicle you want for your business, such as:

  • Getting a business line of credit
  • Merchant cash advance
  • Business credit cards

How to Get Truck Financing

The process of getting truck financing is similar to other loan applications. You’ll need to gather some important documents for the lender, including:

  • Business licence 
  • Profit-loss statements
  • Tax returns
  • Bank statements
  • Cash flow statements 
  • Driver’s licence

Once you submit your application, lenders will do a risk assessment. They will determine if you fit the criteria of their ideal borrower. Be sure to include a loan proposal that details how you intend to use the vehicle loan, your business activities, and any other financial documents that could help you secure the loan. Some lenders may also want to look over your personal credit and finances before they are comfortable approving your loan. 

As a borrower, try to make sure that you have a strong financial position, including a good credit rating. Doing so can help you unlock the best interest rates and loan terms. Although you may still qualify for truck financing if you have poor credit, you’ll also be given a higher interest rate for your loan. If you or your partner have a low credit score, you may be asked to provide a personal guarantee. 

Expect that there will be some cost with securing a loan. This could be application fees or a down payment on the vehicle. Be sure that you have enough to cover these costs. 

Finding the right truck financing for your business may take some time and effort. However, it will be worth it if your dream is to add vehicles or a fleet to your company. For more information about financing options for truck purchases, call Truck Loan Center at 1-866-230-0094 or contact us here

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