January 24 2020

Semi-Truck Financing

So you want to obtain semi-truck financing, either for a lease or a loan. Chances are you have lots of questions about the process. Fortunately for you, we here at TopMark Funding have answers to help you get the ideal semi-truck financing for you and your trucking company.

If you are interested in obtaining semi-truck financing, look no further than TopMark Funding. We provide soft credit checks to pre-approve you for a loan without harming your credit score in the process.

If you are interested in obtaining semi-truck financing and have questions, we have created this article to answer frequently asked questions that truckers ask us when filling out an application. Whether you have questions about buying a semi-truck, credit, truck insurance, or Section 179, we are here to help!

Buying a Semi-Truck

How Much is a Semi-Truck Payment?

The world of finance is a little finicky, filled with few straight answers. The terms of a loan are all a web of factors that interact with one another: you change one and the others will change in reaction to the new number. One of these factors is the monthly payment. If you want the lowest monthly payment possible, you will want to have:

An excellent credit score
A low-interest rate
A large down payment
A long loan duration

The opposite is true for a high down payment. In general, however, you should expect a truck payment to run you about $1,500 to $5,000+ per month. This all depends on the interest rate, down payment, length of financing, and truck price.

How Much Does a New Semi-Truck Cost?

That depends (prepare to hear that answer a lot in this article!). There are various brands of semi-trucks that all run basically the same price in an attempt to stay competitive, but different big rigs have different features that impact the final price. These include features such as:

Engine specifications (horsepower, torque, fuel efficiency, etc.)
Fuel capacity in gallons
Day cab or sleeper, and, if sleeper, the size of the sleeper section of the truck.

In any case, the cost of a new Semi-Truck can run anywhere from $100,000 to $200,000. When you buy a new vehicle, semi-truck or otherwise, it automatically depreciates in value by about 9%. Which can be used as a tax deduction!

How Much Does a Used Semi-Truck Cost?

Depends. The single greatest determining factor of a used big rig will be the mileage: how many miles have the engine and the chassis traveled?

Moreso than with a new semi-truck, you will need to do your research on a semi-truck’s history to determine whether you are getting a good deal or a raw one. A low priced truck might seem like a good investment, but if you have to spend money getting replacement parts every few months, was it really worth the savings on the initial purchase? Typically a nice used semi-truck is starting at $40k up to $80k+ depending on make, model, miles, and condition.

Check out these truck listing sites for more details and inventory

Do I Need a CDL to Purchase a Semi-Truck?

The person paying for the semi-truck and the person driving the vehicle can be two different people. Let us assume you want to start a business with your brother, a trucking partnership. You will operate all of the behind the scenes work such as the accounting, and your brother will be the one behind the wheel. You can be the one to purchase and own the Semi-Truck, while your brother, who has a CDL, can do the driving.

Essentially, it doesn’t matter who does the financing so long as the person with the CDL does the driving for the business. If you want to get into the business for yourself and do not have a CDL, however, there is no company that will rationally finance someone with no means of extracting value from the investment.

What Is the Best Brand of Semi-Truck?

We get asked this question all the time, what is the best semi-truck? Or what’s the most popular semi-truck? There are a large variety of semi-truck brands across the United States, some of which include:

The most popular brand in America is Freightliner, which controls forty percent of market share, more than double its closest competitor. As to which truck brand is the best comes down to personal opinion, but it is evident that Freightliner has managed to create a large base of happy repeat customers.

Check out our article about the Best Semi-Trucks

Credit & Semi-Truck Financing

What Credit Score Do I Need to Finance a Semi-Truck?

Theoretically, you could finance a semi-truck with the minimum FICO of 300, but you are crazy if you think you would ever want to do that. We here at TopMark did some analysis of the funded deals we did in 2019, most people got terms they were happy when they had a FICO of 667 or higher. It goes without saying, the better the score the better the terms. But, it is possible to get approved with a lower credit score. You have to consider that your monthly truck payment is a business expense. And without having trucks on the road you can’t get paid.

Here’s A Breakdown Of The Fico Score Ranges

300-579: A score in this range is considered Very Poor. Credit applicants with a score in this range will often be required to pay larger fees and deposits, or sometimes may not be approved for credit at all. 16% of people have a score in this range.
580-669: Scores between the 580 mark to the higher 600s are called Fair credit scores. Often, people with scores in this range will be referred to as subprime borrowers. A total of 17% of people have a credit score in this range.
670-739: This range is referred to as Good. Individuals with scores this high have a much lower rate of default. Statistically, about 8% of applicants with a Good range credit score will become seriously delinquent. Around 21% of people have a score in this range.
740-799: People with scores in mid to top 700s are in the range of Very Good. Borrowers with scores in this range will receive better than average interest rates from banks and lenders. 25% of people have a score in this range.
800-850: The top of the scale is considered an Exceptional credit score. Individuals with a credit score above 800 receive the best rates from lenders. Around 21% of people have scores between 800-850.

Statistically speaking, most people’s credit scores fall between the range of 600 to 720.

How Can I Finance a Semi-Truck With Bad Credit?

What is bad credit? We get asked this question all the time. To some bad credit might be a 550 credit score and to others, it might be a 650. Some lenders may be fine with a 550 credit score if you have enough time in business, tradelines, ample down payment, etc..

Just like any other financing program, you apply for, getting approved for semi-truck financing is dependant on your credit score. But there are other factors that will determine your eligibility.

What Affects Your Credit Score

Payment history – This shows if you’ve made your payments on time or at all.
Credit utilization rate – How much of your credit you are using on your credit cards.
Type, amount, and age of credit accounts – Lenders do want to see diversity on your credit report. Having a good mix of credit cards, a car loan, maybe a mortgage on their helps your score.
Total Debt Owed – This is the amount you owe in loans and how much is on your cards.
Bankruptcies, Child Support Due, Public Records – Filing for bankruptcy or having a large amount of delinquent child support will hurt your score.
New Credit Accounts – Opening a lot of accounts in a short period of time can hurt your score. If you have gotten too many loans or credit cards in a 2-year period, it can ding you.
Hard Inquiries – The number of times a lender has requested your credit information will affect your score. These searches stay on your report for 2 years.

Learn More About Credit And How It Affects Semi-truck Financing. – The Truckers Guide To Understanding Credit

Truck Insurance

Insurance Types

Before you get truck financing, you will need insurance. There are many types of insurance you may need, and what you need depends entirely on what you need covered. Insurance types include:

General liability
Primary liability
Non-trucking liability
Bobtail
Physical damage
Motor truck cargo
Worker’s compensation

If you want to learn more, check out our article on commercial truck insurance.

How Much Does Commercial Truck Insurance Cost?

Like the terms of financing a big rig, the terms of insuring a commercial truck has a variety of factors that impact each other to create one complete policy. Here are the factors to consider when it comes to the price of an insurance policy:

Coverage limits
Deductible amount
Loss (accident) history
Type of physical damage coverage
Truck value
CDL experience
Cargo type
Weight of freight
Annual estimated driving distance
Credit history (excluding California, Hawaii, and Massachusetts)

Most of these factors describe themselves, but if you need more clarification, you can check out our article about commercial truck insurance that explains each of these in greater depth.

Insurance Cost Estimates

General Liability (GL) – Typical coverage limit of $1 million with an estimated annual premium of $750 to $7,000
Primary Liability Insurance – Minimum interstate trucker coverage limit of $750k with an estimated annual premium of $2,500 to $4,000 per truck
Non-Trucking Liability – Typical coverage limit of $250k with an estimated annual premium of $450 to $5,000 per truck
Bobtail Insurance – Typical coverage limit of $1 million with an estimated annual premium of $350 to $450
Physical Damage Insurance – Stated or the actual value of the truck with an estimated annual premium of $2.5% to 5% of the truck’s value.
Motor Truck Cargo Insurance – Typical coverage limit of $5,000 with an estimated annual premium of $500 to $1,000

Your business is probably your largest asset, and not having the proper insurance for your trucking when an accident happens can cause financial ruin. Insurance is like anything else you buy. You get what you pay for. You want to make sure you use a reputable carrier and or broker.

If you’re a fleet owner and have employees and or multiple drivers you need to have a strong insurance portfolio. Having a good insurance broker can help you get the correct coverages and bundle discounts for your business insurance.

Section 179

What is Section 179?

Section 179 allows knowledgeable business owners to write-off their depreciable assets as an expense instead, effectively getting a discount on the truck equal to their tax rate percentages.

Say you are the owner of a truck driving business that will owe the US government $100,000 in 2020, and your marginal tax rate is 35%. If you purchase a $150,000 new truck and use Section 179 to write it off as an expense, you will lower your tax liability by $52,500, meaning you will owe the US government only $47,500. This tax reduction effectively makes the cost of purchase for the new truck $97,500.

For more information, check out our article on Section 179.

What is Form 4562?

Form 4562 is the IRS form to declare depreciation and amortization. It is also where you use Section 179 to deduct assets as an expense immediately. When filling out Form 4562, you will want to work backward: Part I, the part relating to Section 179, requires you to finish Part V first.

Want to check out Form 4562 for yourself? Here is a link to the PDF.

Conclusion

Financing a semi-truck, whether new or simply new-to-you, has a variety of different facets that need examination. Credit score, the truck brand and model purchased, the insurance required, knowledge as to who is driving the commercial vehicle, and more all impact the process. Fortunately for you, TopMark Funding is here to help you with a plan to help you get commercial truck financing every step of the way.

CHECK OUT THESE OTHER GREAT TRUCKING ARTICLES

ABOUT TOPMARK FUNDING

TopMark Funding is a top-rated semi-truck financing and equipment financing company located in Roseville, CA. We specialize in commercial trucking and heavy equipment. Our mission is to become your long-term financial partner by helping you grow your trucking business and fleet.

We’re not here for the short-term, we’re on the long-haul with you!

We have financing options for commercial trucks, trailers, and small businesses. We have great rates, low down payments, and flexible monthly payments regardless of credit history.

Learn more about: How to Get Commercial Truck Financing

Fill out the contact form or give us a call at (866) 627-6644. One of our truck financing specialists will contact you as soon as possible to go over your truck lease needs and learn more about you and your business financing goals.