What are the interest rates and down payments on semi-trucks and trailers?

Jun 25, 2019

This is a question that we get asked on a regular basis at Nationwide Equipment Finance. Clients want to know what their interest rate, down-payment and terms will be, before they buy equipment. The short answer is, it’s different for every lender, and varies based on a variety of factors explained below.

One of the very first things to understand is that commercial or business financing is not like personal financing. Clients often expect to receive “Car buying” interest rates and terms when purchasing a semi-truck or trailer. The reason these rates are typically higher is due to default rates and the risk associated with the trucking and transportation industry.

Each lender has a specific group of things they look for to approve or decline a deal, and based on the following factors and underwriting criteria, the equipment financing terms will be decided. Simply speaking, the determined “Risk Rating” the lender gives a client or a specific piece of equipment the higher the interest rate, down-payment, and chance of a decline there will be.

Equipment Specific Factors:

Age of the asset: The age of the asset often times will determine “Reliability” in the eyes of the lender. New or Newer equipment tends to have less problems than older equipment and typically comes with a factory warranty versus an aftermarket warranty or in most cases, no warranty at all.
Type of Equipment: rarely does a lender differentiate between the make and model of the truck or trailer. However in some cases, the lender will simply not allow a specific type of equipment that they have had trouble with in the past.
Year & Mileage/Hour Reading: Most lenders have a cutoff at a certain truck odometer mileage reading or a reefer trailer hour reading. Obviously the lower the miles or hours on a truck or trailer the better the terms will be.
Equipment Warranty: If a truck or a trailer still has factory warranty left for the life or length of the loan, the lender will view this as less risk and be more inclined to provide better terms. Factory warranties are viewed as a better option than aftermarket warranties, however having a warranty is 100% better than not having one.
Dollar Amount of the Asset: Your terms will change based on the price tag of the asset you are financing. If you are looking to finance something for $10,000 it will likely have a higher interest rate than if you are purchasing something for $50,000. However, even though $10,000 loan has a higher interest rate, it often equates to less money paid to the overall interest than $50,000 loan. Some advice to figure this out is to always calculate your interest percentage (%) and the total dollar amount ($$) of interest that will be paid over the lifetime of the loan.

Client Specific Factors:

Personal Credit Score & History: All lenders will run a personal credit report to determine the score, but most importantly the details of the credit history and clients past. The lender is looking mostly for similar types of loans, to see how they were paid in the past. For the lender the past is a good indication of the future. If you have past credit issues you will typically get a decline or a higher down payment and interest rate approval.
Pay Net / Business Credit Reports: Due to this being a commercial or business loan (that is also guaranteed personally) the lender will also run a pay-net or business credit history report. This is the same as a personal credit report from Experian, Equifax, or TransUnion but instead is a record of your businesses credit history.
History & Experience in business: Overall experience in the industry is a positive, but history in your specific business is preferred. All lenders are different but most look for 2 successful years in business before they are willing to give great terms.
Bank Statements & Tax Returns: Unless you have an established business for more than 2 years and you have excellent business and personal credit, the lender will often ask to verify your bank statements and tax returns. They are looking for two things: 1. to see if you are making money and have the means to buy the equipment and pay back the loan. 2. That you have the basic business documents handy and organized.
Housing Status: Some lenders will also factor in things like being a home-owner. It shows stability and history has shown that people who own a home and have a mortgage are more likely to pay a loan on time. If you are renting your home, then they will look at how long you have been at the current address.
Good References: Most people overlook this part of a finance application and do not think hard about the references they should put down. When lenders are “on the fence” have good industry references will most of the time push them over to an approval rather than a decline.
Client Insurance: Before closing on the loan, the lender will ask for specific insurance to give them coverage on the asset but also with liability before they officially lend any money. It is best to understand the coverage requirements the lender will ask for prior to going into documentation.
Amount of Down-payment: Unless you have past commercial financing experience, a business over 2 year’s old and excellent credit, rarely will you get approved for a zero percent down-payment. Typically your lender will require you to put down anywhere from 10-30% down. Putting down more money than the lender is requiring will reduce the risk of the loan and in most cases will make the terms of the deal more favorable.

Who is the best lender to finance a semi-truck or trailer?

Unless you are given the underwriting criteria for all of the lenders and banks in the trucking and transportation industry, you simply would not be able to know where to go for the best deal. The major advantage of working with Nationwide Equipment Finance is we work with over 40 industry banks on a regular basis and we know what they are looking for and how to work with them to get the best deal possible in the industry.

Are you looking to purchase your next truck or trailer, or possibly revamp your fleet? Nationwide Equipment Finance specializes in semi-truck and trailer financing. Whether you are an owner operator or a large fleet looking to finance large quantities of equipment, Nationwide Equipment finance will provide the most competitive rates and quick friendly service, while structuring the loan your company needs to be successful and grow your business profitably. Call 954-678-4124 to get started today!