One of the oldest types of businesses currently in existence is the transportation of goods. The trucking industry is a multi-billion-dollar industry with a lot of room for growth. This is because businesses need raw materials, finished products, and other items moved from place to place. Consumers also need to relocate now and then. On the other hand, construction companies always need more trucks to transport building materials to construction sites. Construction companies also need trucks to transport earth and waste materials from construction sites to landfills. As you can see, trucks are always in high demand. If you are interested in getting into this industry, or you’re already in the industry and want to expand your fleet, you can get truck loans to make your dream a reality. Below is a list of finance options for buying a new truck:
1. Truck Financing
Truck financing is the most popular option for most people. Truck financing is a type of secured lending. You only need to identify a truck you want to buy and get an invoice from the seller. The invoice is submitted along with the financing application forms. The financier will pay the seller the full price for the truck and allow you to take possession of the truck and use it as you wish. The financier will put a lien on the truck’s logbook as collateral for the loan. You will be required to make monthly payments to pay the full cost of the truck together with other charges, such as interest. The beauty of this option is that you can use the asset as you wish and allocate some of the income it generates to servicing the loan. Secondly, you can claim tax benefits, such as depreciation and wear and tear, to reduce your tax liability. However, if you default on your payments, the financier will repossess the truck and sell it to recover the outstanding balance. It is important to note that most firms require a down payment, so you will need around 20% of the purchase price.
The second option is to lease the brand-new truck and get full ownership rights once you complete all the payments. Renting to own is a good option if you do not have the deposit needed for truck financing. You only need to choose a new truck that meets your needs and sign the lease agreement. The leaser of the truck is the legal owner of the truck and will claim all the tax benefits as you use the truck in your business. The beauty of this option is that if a business fails, you will not have any debt obligations because the leasing company will simply repossess their truck. To get ownership of the vehicle, you must complete all the required payments. Usually, the lease term for this type of contract is longer than traditional lease agreements. This is because the value of the truck and interest must be spread over several years to ensure an affordable monthly or quarterly lease fee is achieved.
3. Hire Purchase
This is similar to rent-to-own agreements except for the fact that a deposit is usually required. This can be anywhere from 20% to 40%. The balance is spread over several months or a few years. In case of default, you will lose both the deposit and the truck. This is a costly option that has become unattractive in modern times. Due to intense competition in the industry, companies are nowadays lowering the required deposit and improving the T&Cs.
4. Unsecured Business Loans
If your business has been in existence for a while and has a healthy cash flow, you can apply for an unsecured business loan and use it to buy a truck. While there are better uses for business loans, using the money to buy a truck has several advantages. First and foremost, you will get full ownership of the truck without a lien attached to it. This means you can also use the truck to procure a secured commercial loan. Secondly, you can claim all the tax benefits and use the truck to generate more income. Unsecured loans can be a great option if you qualify for a large business loan.