Bottom Line
Truck Financing

Craig D. Sciara

With the escalating prices of new trucks, who can afford to pay cash these days? It is staggering to think that a new truck can cost more than $100,000 today. Even late model used trucks are priced as much as new trucks were just a few years ago. The proposition of purchasing a truck today is a daunting task, even when you secure financing. The process sounds simple, but nothing could be further from the truth.

Why is financing a truck such a difficult proposition? More specifically, why is it so difficult to find a willing lender? The first obstacle is the fact that trucks are business-related assets; therefore the transaction becomes a commercial loan. This alone will cause most lenders to cry foul. Many lenders view independent truckers and their trucks as too risky. Obviously this is flawed thinking. Many of these lenders lack trucking industry knowledge and have preconceived attitudes about professional truckers.

How can this be right, because credit seems to be all around us? Our mailboxes are full of credit card solicitations from lenders all over the country. I am continually amazed at the number of card offers that I receive on a weekly basis. Who hasn't heard the radio ads for home equity loans? I can't drive to work without hearing a couple of them. Ever see an automobile commercial without the mention of financing? Even banks regularly run newspaper ads for loans (this was unheard of a few years ago). Surely there must be sources willing to finance trucks for owner-operators.

Banks must be the answer. They have vaults full of money and make commercial loans all the time. After all, professional truckers move America and trucks are revenue-producing assets. This should be an easy sell. Think again. A visit to a bank can be a humbling experience for a professional trucker. Just let the receptionist at the bank know that you would like to see someone regarding a loan for an over-the-road truck and unless you have a very special relationship with that bank, you're likely to meet the security guard. If you actually get to meet with a loan officer, be sure to count the number of times your bankers head spins around when you utter the words "independent trucker." If you haven't already learned, banks understand two types of trucks, those that have pick-up beds and those of the armored variety.

Many lenders have tried truck financing, but failed miserably. They seem to jump out of the business as fast as they jump in. If the truth were told, these lenders probably had no trucking industry experience and lacked trucking professionals on staff. There is more to lending than just writing a check. Lenders need to know truckers, trucks and the trucking industry to be successful. The special nature of the trucking business dictates the need for specialized lenders who truly understand the owner-operator and are dedicated to the trucking industry.

Fortunately there are a number of lenders willing to finance owner-operators. Unfortunately, they typically don't lend directly to individuals, but rather through dealers. This limits your ability to secure financing on your own, and you give up some control. The dealer can actually dictate the terms, rate, and conditions of your financing including who the finance source might be. As you can imagine, this arrangement can lead to dealers securing the most advantageous deal for themselves rather than for you. I am not suggesting that every dealer makes this their practice, because there are dealers out there who will do their best to secure the best possible deal for their customers. Having said that, this truly is a buyer beware situation.

To put this a bit more into perspective, remember that these lenders get the bulk of their business from the dealers. Plus, these same lenders lend directly to the dealer for things such as inventory financing. These relationships are very strong and very old. Where do you think these lenders loyalties lie? Aren't you the lender's customer? Only indirectly, as a result of the dealers decision. This is a very competitive business and financial institutions are fighting each other for the chance to finance the dealers' customers. Just call the largest lender in the industry and they most likely will be thrilled to finance your truck, but try to discuss rates and terms with them and they will most often refer you to a truck dealer.

Surely I haven't painted this doom and gloom picture without some hint of a solution. Fortunately that is not the case, since I would have a difficult time explaining my motives to the boss after he reads this. Part of OOIDA's mission is to provide a better business climate for professional truckers. In keeping with that mission, I have some great news to share with you – OOIDA has developed a truck and trailer finance program available exclusively to members of the association. This new program will allow owner-operators to secure competitive financing with attractive terms on their own. What a great concept! If you're ready to go shopping, give us a call at (800) 444-5791. LL