Whether you are a first-time owner/operator or a veteran fleet owner, there will be a time when you will have to conduct a review of your current buying cycle. However, there is a certain level of complexity involved here as there is no clear cut formula about which buying cycle is best for you as it depends upon many different variables.
The condition of the market, the current finance rate, the value of the dollar, and consumer buying sentiments all play an important role in determining whether investing in a new or used commercial truck is the better option.
Financing Companies Preference
Currently, finance companies are more inclined towards lending money to the first-time owner/operator for a NEW commercial truck. Due to a higher rate of owner/operator bankruptcies, lending institutions take solace in the fact that they will have some equity if the borrower is unable to make good on their obligation of paying back the money.
Investing money into a brand new truck carries peace of mind both for the owner as well as the finance companies. As an owner, you know you will be driving a truck that carries over 450,000 miles of extended warranty, and this is one crucial factor that makes finance companies more susceptible to lending as well.
However, your current budget may not match your desire to be the proud owner of a brand new, big shiny truck. It is always better to start small and then work your way up.
Still, as Mark Twain says, "I can resist anything except temptation; similarly, it is pretty hard to resist the urge to buy the shiniest new truck on the lot-- even for a first-time buyer."
Down Payment Options on Commercial Trucks
Further enhancing your temptation to be the proud owner of a new truck are the finance companies who often sweeten the deal on a new truck. In the case of new trucks, the down payment is low and the repayment period is longer. For used trucks, the inverse is true.
The down payment for a new truck is usually 10 percent of the purchase price and the repayment period is around 5 years—you can even get it extended to 6 years under certain circumstances. In the case of a used vehicle, the down payment doubles to 20 percent.
The overall logic behind it all is pretty simple. Finance companies have equity if you purchase a new truck along with warranty protection, which comes in handy if they have to remarket it in the event of a default. In fact, finance companies cannot be blamed for there is little or no chance of recouping their investment in case of a default on an old vehicle.
Lending institutions no doubt push first-time owner/operators – or any truck buyers for that matter - towards a new truck, but it in no way implies that you have to buy a new truck because of more lucrative financing options. Just be sure to do your homework if you are more inclined to purchase a used vehicle.
Rules for Purchasing a Used Commercial Vehicle
In fact, experts point towards three basic rules you should follow while purchasing a used commercial truck:
- Look for and try to purchase a one-owner truck if possible.
- See if all the maintenance records are available.
- Try to purchase a truck still covered under an extended warranty.
This all makes sense because if a truck has clocked 200,000 to 300,000 miles, you still have around 120,000 miles of warranty remaining. There are certain jobs like local deliveries that do not call for investment in a brand new truck since the mileage is relatively light.
In general, you'll want to understand what are the most important questions to ask when buying a commercial truck and make sure that you get all of the information that you need.
So What Should You Do?
In the end, new trucks are a better option for established fleets with positive cash flow. These fleets can also take advantage of the tax depreciation. The fluctuation in dollar value also plays an essential part in fluctuating truck prices. If the dollar weakens the cost of new trucks moves up, which in turn makes used trucks a better option.
Mack Truck Dealers has highly experienced experts who are more than happy to chat with you and discuss your specific requirements and budget. Friendly and helpful, they can guide you in the right direction and help you make a final decision with confidence. You can discuss your needs with us that might include comfort, fuel economy, safety, pulling capacity, reliability, and performance and we will help you select the right truck that can offer an excellent return on your investment.