How to finance a truck as an owner-operator

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Ask a Lender
October 17, 2017 | Updated October 19, 2017


Key Points

How lenders assess owner-operators

  • Business and driving experience
  • Credit score
  • Down payment
  • Vehicle to be financed

Independence, flexibility and more cash in hand — such is the promise of life as a trucker with your own authority. Being an owner-operator is not easy, however. Independence means just that: no leasing company to depend on for loads, maintenance, fuel, insurance, and myriad other expenses and tasks. Yet if you have the business acumen and initiative to work under your own authority, the results can be lucrative.

How to qualify for a truck loan

To strike out on your own as an owner-operator, you’ll need a truck, of course. They’re not cheap, so you will most likely require a loan. This can be problematic for independent truckers. In general, business loans are notoriously difficult to qualify for. To top that, lenders view owner-operators as high-risk borrowers due to the competitive landscape of independent driving and a traditionally high rate of failure. Moreover, if you rely on the truck for your job and it breaks down, you have no way of generating income — and thus may struggle to repay the loan.

There are four main factors that will influence your loan eligibility as an owner-operator: experience, credit, down payment amount and the vehicle to be financed.

Business and driving experience

Lenders want proof that you are a good investment, demonstrated by your driving experience and ability to gain work as an independent driver. Most lenders require that you have held a commercial driver’s license for at least five years. They will also want your U.S. Department of Transportation and Motor Carrier numbers authorizing you to operate a commercial vehicle business.

Most lenders also want to see a minimum of two years in business as an owner-operator and will assess your financial statements, tax returns and balance sheet. Such history is unrealistic for many new owner-operators looking to finance a commercial vehicle. Making a larger down payment may help you qualify without this prior business history by alleviating some of the lender’s risk.

Credit score

As with any loan, good credit is paramount to getting a low interest rate — or qualifying for a loan at all. Low rates advertised by many companies are only available to those with credit of at least 660. While there are loans available for individuals with poor credit, there will be a limit to how large a loan you can obtain. You will likely need to make a down payment of 25 percent or more and still face high interest rates.

Down payment

How much you will need to put forward as a down payment depends on your credit score and the vehicle being financed, but typically ranges from 10 percent to 20 percent. Individuals with poor credit or looking to finance an older truck may have to make a substantially higher down payment, as much as 50 percent. The larger your down payment, the better loan conditions you will be eligible for.

Vehicle to be financed

A commercial vehicle loan is secured by the truck itself, meaning that if you default on the loan your lender can seize the property. As such, lenders want to make sure the value of the truck is at least the same as the loan amount and are hesitant to finance vehicles with a low resale value — typically older vehicles with higher mileage. Most lenders will not finance a truck that is older than 10 years, and many even draw the line at five years. Your vehicle should have no more than 700,000 to 1 million miles on it, either.

Many lenders also will not finance a vehicle purchase from a private party as the history and condition of the truck is unclear. They may be willing to consider it if you support the purchase with extensive documentation on the seller and the vehicle condition.

Don’t forget insurance

Lenders will require that you carry full-coverage insurance for the duration of the loan. Depending on a variety of factors – including what you haul, the type of vehicle and your driving record – commercial vehicle insurance costs can exceed $10,000 a year, so be sure to factor this expense into your budget when planning your business as an owner-operator.

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