3 Commercial Truck Financing Options

green and white vintage truck

If your business needs a commercial truck, you might consider financing one. After all, most new commercial trucks cost over $100,000, and that’s a lot of money to part with.

Financing can give you access to a commercial truck without the high upfront cost, so you can preserve more of your cash flow.

In this article, we’ll go over the general financing process for commercial trucks, three types of commercial truck loan lenders, and more.

Let’s get started!

The general process for commercial truck financing 

Financing a commercial truck is much like financing a car or a house. Basically, a lender offers to buy the commercial truck for you if you make a down payment and pay monthly payments (including interest) until the loan is paid in full. 

The lender makes money off the interest you pay, and you get to use the commercial truck in the meantime.

The truck itself serves as collateral against the loan. If you fail to make payments or cannot fulfill the loan agreement, the lender can seize the truck.

Here are a few different types of lenders that offer commercial truck loans:

1. Truck dealers

If you’re buying a commercial truck from a dealer, sometimes you can get a loan directly through them. This can be the easiest and most convenient financing option because it’s one less organization to deal with.

That said, financing through a truck dealer may mean more limited loan options and stricter loan terms.

2. Banks

Banks are the most common lenders in commercial truck financing. With them, you can generally expect the following terms and requirements:

  • A credit score of at least 600 
  • A good credit history (no bankruptcies, for example)
  • A down payment somewhere between 10% and 25%
  • A loan term of about 5 years
  • An interest rate of 5% to 6% (but if your credit is poor, your interest rate could be anywhere between 7% and 30%)
  • Your business has been operating for at least two years
  • You must provide the following documents: 3 years of financial statements, tax returns, business owner’s personal financial statements, commercial driver’s license, and proof of truck insurance (required by the lender to offset the financial risk of something happening to the truck)

If you have an existing relationship with the bank, this may make it easier to get your loan approved or to get more favorable terms.

3. Alternative lenders

Alternative (aka non-traditional) lenders sometimes offer a little more leniency when it comes to qualifying for a commercial truck loan, and you can often get approved faster (even if you don’t qualify at a bank or you have poor credit).

However, alternative lenders tend to have higher interest rates and shorter loan terms. So you must be careful not to accept a loan you can’t afford.

Bonus: Leasing as an alternative to financing

Say none of the financing options listed above sit well with you. Then you may want to consider leasing a commercial truck instead. 

Leasing a commercial truck comes with many benefits. Here are just a few:

  • You may get a more affordable monthly rate.
  • You don’t suffer from the truck’s depreciation in value (because you don’t own it).
  • You often still get a warranty.
  • Leasing terms are generally shorter than loan terms.
  • There are fewer upfront costs, which frees up more of your cash.
  • It’s easier to trade in or upgrade your truck.
  • It’s easier to lease a truck with poor credit.
  • Lease payments can still be deducted from your taxes as a business expense.
  • The truck maintenance may be taken care of for you.

Overall, leasing a commercial truck can be a nice alternative to financing one, especially for businesses that are relatively young and don’t yet have a lot of capital to invest.

Final advice

Whether you choose to finance or lease a commercial truck, make sure you can afford it. Set a budget, compare loans and leasing options, choose one that meets your needs, gather the required paperwork, and apply!