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New or Used? Decisions, decisions…
So you’ve been thinking about buying a semi truck in 2020? We at AFT Dispatch and A2C Logistics believe that buying a semi truck is a big decision but also a good investment, if done right. So let’s go through the steps of buying a semi truck in 2020 and make sure you get a good deal.
First things first, are you looking to buy a new or a used truck?
Having a brand new truck is nice because everything works so well, you get the latest and greatest in technology, and manufacturer warranties are quite comprehensive.
On the other hand, a used truck can save you a ton of money if you don’t care for trinkets, having the latest model year, or are okay with repairing it yourself or working with a trusty mechanic.
Let’s Get Personal
The first semi truck my brother and I bought ended up costing us over $30,000 in repairs in the first year alone. There were a ton of maintenance costs and repairs. By the time we sold it, it had a critical failure and we sold it cheap to a couple of guys who knew exactly how to fix it.
Our next trucks were all purchased brand new from the dealer and with extended warranties which saved us thousands of dollars. They have all the creature comforts, are very fuel efficient, and rarely break. When they do break, most things are covered under warranty.
It would seem that the choice is pretty clear cut, buy a new truck, but that may not be the case. A brand new truck can easily cost over $150,000 while you can pick up a quality used truck for less than half of that. The decision is ultimately up to you but it’s one that you might want to spend some time deliberating on.
What’s the Truck’s Purpose?
As TruckerToTrucker.com says “a truck with worn-out brakes or balding tires is a far better investment than a rig with a run-down engine.” At the same time it’s also important to consider what you want out of the truck. It’s going to be your part-time home and you want to make sure you’ll be happy with it. Are the seats comfortable, does it come with the amenities you want, how’s the cab and sleeper berth?
Are you planning on running locals, regionals, OTR, or coast to coast? Will you be hauling standard dry van and reefer loads or will you pull a flatbed or stepdeck? Will you be pulling heavy, oversize, overweight, or specialized loads? Do you prefer a manual or an automatic transmission? What about the axle configuration? Engine power output? You have to consider all of this when deciding on the truck you plan to purchase.
I can’t stress this enough. Decide on the truck’s purpose before you purchase. You can’t allow yourself to fall in love with the truck for all the wrong reasons. Remember, a truck is a tool and you’re going to have to use that tool to make money. If you don’t know the purpose behind the purchase of a tool, it’ll just sit around in the garage collecting dust. The same goes for buying a semi truck in 2020 or any year of that matter.
Inspecting a Used Semi Truck
Buying a semi truck in 2020 without inspecting it is asking for trouble, it’s a real cat in a bag situation.
You should obviously check everything yourself and take it for a spin. If everything checks out, get the truck over to a dealer and have them perform an oil analysis. Make sure they perform a full inspection including lights, wiring, corrosion, engine, and brakes.
Does the owner have a full maintenance and repair history? If yes, great, review it carefully to make sure it has been well taken care of. Take a look at the most recent DOT inspection. Were there any issues? If yes, were those corrected? Was the truck ever involved in an accident? If yes, be extra careful and maybe even reconsider purchasing it.
Don’t forget to ask if there are any remaining warranties on the truck. Did the current owner purchase an extended warranty and can that be extended if it’s close to its end? As I’ve mentioned, a good extended warranty can save you a lot of money in future repair costs and is definitely worth exploring.
Pricing and Financing
Once everything has checked out and you feel you have a good truck on your hands, you need to look at the price. Is the truck competitively priced? Have you looked at other trucks in the area with similar years, options, and mileage? One good place to do your research is truckpaper.com
If everything clears and you have a good truck at a good price, then step into the realm of financing. There are different options here as well, you can finance the truck, you can lease it, you can have an option to buy, you can have a balloon payment, you can have different terms to your loan or lease, and you could have prepayment and early repayment penalties.
A whole lot more goes into this and I strongly advise you to meet with a qualified finance professional like a good CPA. They can quickly look over the offer and tell you how this will work out over time. They can review the amortization schedule and can tell you more about how interest is calculated in each particular case. Something else to consider is depreciation and how that will affect your taxable income. Believe it or not, the structure of your lease or loan, will have a different effect on your taxable income and what you can and cannot deduct.
Qualifying for a Commercial Loan
For semi-truck loans, lenders typically like to see a score of at least 600, while some require 660 or higher. Exact qualifications will vary by lender. Some will require a past large purchase. Others may require home ownership.
Something else that’s important to keep in mind is that there are semi truck dealers out there who work with the secondary or tertiary market. If a dealer for a specific manufacturer does not approve you for in-house financing, or their partner banks and lending institutions say no, you may have to go shop in a different market. This is likely to end up costing you more in both the short and long term.
I almost always advise against this because you end up paying so much more for the truck than it’s worth. You may find yourself with a truck that’s old and breaking down while you still owe a substantial amount on it. This is a good idea if you need to build your credit and are set on working hard for a few years.
The Devil’s in the Details
It’s important to look at the details of your financing offer. How is the deal set up? Does making extra payments go toward the principal and actually offset the amount of interest you’re going to pay or does it prepay the payments a month ahead? It’s great if you can make principal-only payments and cut down on your interest which effectively lowers your interest rate. Oftentimes this isn’t the case and the buyer is actually hit with expensive prepayment penalties or even early repayment penalties.
If after going through all the paperwork and running your numbers you feel you have a good deal or a deal you can work with, then go for it. If you know that the truck and financing will cost you X-amount and the amount you’re planning on bringing in is X-amount and the figures work, then you might just have a good deal.
Obviously this isn’t a comprehensive article and you should educate yourself further before tying yourself in. Hopefully it does help get the gears moving and gets you to think about some of the things I talked about here.
Buying a semi truck is a big decision and an expensive one at that. You should know why you’re buying, what you’re buying it for, what your plans for work are, and have a plan B and a plan C at the ready.
We’ll be releasing a series of videos on these topics so I highly recommend subscribing to our YouTube Channel and turning on notifications so you don’t miss out on the content we’ll be putting out very soon. Here’s the link to the AFT Dispatch YouTube Channel.