Larger selection
of trucks with more diversification choices in specs
If it is your first truck you have probably found that finding
the right truck is the easy part. Finding a financing solution can be next
to impossible. Many of the traditional lenders will not consider a first
time buyer for financing. Lenders weigh risk associated with each loan and
applicant. Every used truck can be considered high risk. When you introduce
a first time truck buyer into this equation the high risk becomes even
greater. This being true because the first time buyer has no business or
commercial track record for the lender to review. While they maybe great
drivers and look good on personal credit there is a large unknown as to how
they will adapt to the business side of trucking. The only thing that they
can access is the customers personal financial track record on their credit
report. This is one reason that a good credit report with comparable
installment history is very important. This is also a good reason to
consider a company like American Truck Business Service when starting a new
trucking company. This type of service is mandatory under the "First Time
Buyers Option" for exactly this reason. With other types of financing it is
not, but it is still recommended and may help you when being considered for
one of the other types of financing explained on this page. When weighing
the risk of the truck age and mileage are the key points. Statistics prove
that the older the vehicle and the more mileage the greater the chance will
be for catastrophic failure. Many customers initial inquiries include
looking for the lowest price vehicles with a misconception that it will be
easier to finance and make payments on this type of truck. It is in most
cases the exact opposite is true, as the main drivers of lower pricing are
older and/or higher mileage trucks. See example
Example 1
John Doe wants to purchase a low priced truck that he can pay
off quickly then upgrade to a newer model with fewer miles. He believes that
the lender will think it is a good risk to purchase the 2003 model tractor
with 800,000 miles for $18,000 dollars, plus he is willing to invest $5,000
that he has saved for the down payment. After all this is 27% down and most
loan values are about 80% of the suggested retail value. The retail value
guide shows that this truck is worth $18,000. Here is one scenario that the
lender may look at. They have73% or $13,000 exposure on this truck after
down payment. John Doe
operates it for 30 days and it has a major engine failure the renders it
inoperable with-out overhauling the engine. John Doe now needs a loan for
$15,000 for engine repairs and he has no additional funds to put down on the
second loan and since the truck is his primary source of income he cannot
make any further payments. Now they would be at risk for a truck that is
worth $18,000, but they would have $28,000 in it. Remember the ideal loan
value is 80% of suggested retail which would have been $14,400. With the
engine failure they and the customer are at 194% of suggested loan value.
Now the loan would have to be extended and if another major failure such as
a transmission or rear axle goes out it would put the customer and the
lender in an even worse financial position. This is not even taking into
consideration the extra maintenance that is normal for trucks of this age
and mileage. Most trucks that fall into this range are purchased by
true cash buyers.
Example 2
John Doe understands the risk factors. John applies for a truck
that has the right balance of mileage, age and even warranty. He has been
driving over-the-road as a company driver for 2 or more years. He is off to
a great start and his credit reports shows over two consecutive years of
discipline in bill payment and installments. Revolving credit is available
in the event of an emergency. This means that he has access to funds without
having to go through another loan process. He has an ample 20% down and
still has cash reserve to get his new trucking business off and running.
This scenario maybe in consideration for standard
finance solution.
Example 3
John Doe understands the risk factors. John applies for a truck
that has the right balance of mileage, age and even warranty. He has been
driving over-the-road as a company driver for 2 or more years. He is off to
a great start, but his credit reports shows over two consecutive years of
ok, but not perfect credit in bill payment and
installments. Revolving credit is limited in the event of an emergency. He
has had some issues due to circumstances, but is showing trend of
improvement now. He has an ample 25% down and still has cash reserve to get
his new trucking business off and running. This scenario maybe in
consideration for possible secondary lender finance
solutions.
Example 4
John Doe understands the risk factors. John applies for a truck
that has the right balance of mileage, age and even warranty. He has been
driving over-the-road as a company driver for 2 or more years. He is off to
a great start, but his credit reports are not good. This can be due to one
or more of the following reasons:
-
Collections
-
Charge-offs
-
currently slow on payments
-
Revolving credit is maxed
-
No revolving credit
-
Does not have comparable credit
-
Very limited credit (buys everything cash never really uses
credit)
-
Has not paid accounts as agreed on signed contracts
-
Has had some issues due to circumstances and not showing
trends of improvement
-
Has tax lien
-
Behind on child support
-
Has had recent repossession or foreclosure with out
re-establishing good credit
-
Has had a bankruptcy less than 2 years ago with no
re-establishment
Depending on the severity of this scenario is
most likely to not be approved
regardless of down payment percentages. Customer will need to either build
or repair credit prior to applying for a commercial loan.
Below you will find questions that will be asked to determine
the best suited financing options and/or lenders for your business needs.
Used
Freightliner Trucks for sale
What
does it take to purchase your first truck from SelecTrucks of Kansas City?