How much will semi-truck financing cost?

Many businesses need a semi-truck to keep their company running smoothly, whether you’re a commercial shipping company, taking on jobs for other companies or moving your own business’s goods. With the high purchase cost of a truck though, paying cash for one can be incredibly expensive.

You may consider a semi-truck financing option, which can include taking out an equipment loan, leasing or renting. Each option has its pros and cons. Numerous factors influence the cost of financing a semi-truck, from its age and cost of leasing or renting, to the interest rate and fee schedule.

Cost of purchasing, renting or leasing the semi-truck

The biggest expense with semi-truck financing is the actual cost of the semi-truck. On the low end, you can expect to spend about $70,000 for a new semi-truck. You could spend $155,000 to $200,000 or more to get a high-end model from a well-known brand.

Like any vehicle, semi-trucks are made by different companies, and you can purchase standard or high-end models. There are also used semi-trucks available for purchase.

Buying a used semi-truck can help you save money, but you’ll need to do your due diligence to ensure the truck is in good shape and has been properly maintained. You can find used trucks for about half the price of new ones, depending on their age.

Age of semi-truck

If you’re buying a used semi-truck, the vehicle’s age can greatly impact its price. Generally, older trucks will cost less than newer ones. But older vehicles are more likely to have maintenance and repair issues and won’t last as long. Additionally, many lenders only offer loans on trucks that are less than ten years old.

In addition to their lower price, used trucks have the benefit of losing less value soon after purchase than new vehicles, which depreciate quickly. They also cost less to insure, and there may be more data on whether they’re reliable.

Cost of leasing

Another consideration for people who need a semi-truck is whether they should lease or own their vehicle.

Leasing involves renting a truck from another company. You’ll pay a monthly fee to use the vehicle. Usually, that fee will be less than an equipment loan’s monthly payment. You also may not be responsible for the full maintenance of the truck. But depending on the type of semi-truck lease, you’ll have to give the truck back once the lease ends and you don’t build any equity in the vehicle.

Leasing a new truck can cost between $1,400 and $2,500 a month, while leasing used trucks costs about half that much. The good news is most semi-truck leases don’t require a down payment, so you can get in a truck faster with little to no money upfront.

Leases may also come with mileage limits. You’ll pay a per-mile fee if you exceed the limit, which is often around 12,000 to 15,000 miles a year.

Cost of renting

Another option for semi-truck financing is renting it, versus purchasing or leasing one. You may consider renting if you’re looking for a short-term option, such as a daily, weekly or monthly duration. Whereas leases may work better for long-term plans, a rental allows a shorter time commitment when you’re dealing with seasonal demand or sudden surge.

The cost of renting a semi-truck depends on a few factors, such as whether it’s a sleeper cab or day cab, how long of a rental you need and if there’s a mileage cap. You can also incur insurance costs, plus fees and deposits.

Rental costs vary greatly, but daily rentals start around $195 and go up from there. You may receive a slight daily discount for renting it for a weekly or monthly duration.

Interest rate

Semi-truck financing average interest rates range from 5 percent to 35 percent. That said, the interest rate may exceed 35 percent, depending on your credit score, time in business and the lender you select.

Some semi-truck loans have factor rates instead of interest rates. While interest rates are expressed as a percentage, factor rates are expressed as a decimal. Factor rates are charged upfront, so early repayment will not impact the amount you owe. For example, a loan of $10,000 with a 1.25 factor rate would result in a total repayment amount of $12,500. Factor rates are more common in alternative lending.

Fees

Like many loans, semi-truck financing often comes with fees. These fees may seem small, but the more fees added to a loan, the bigger the impact on your business’s bottom line. Here’s a look at some common business loan fees to watch out for.

Down payment

When you get a loan to buy a semi-truck, many lenders require a down payment of 10 percent to 20 percent. This is an amount you pay upfront when buying a truck. For example, if you’re purchasing a $100,000 vehicle, you might offer a 20 percent down payment, or $20,000, and borrow $80,000 to pay for the rest.

Higher down payments can make it easier to qualify for a loan and help reduce the cost of borrowing. Of course, higher down payments also mean you need more cash upfront.

You may not be able to finance a semi-truck with a lower down payment, such as $1,000, unless you work with an online or direct semi-truck lender. If you’re looking for an option with little money upfront, you could consider leasing a semi-truck since many leases don’t require a down payment.

Creditworthiness

As with any loan, your credit score will impact your ability to finance a truck and what rates and terms the lender offers you.

If you have strong credit, you’ll have little trouble finding a lender and can secure the lowest rates, as low as 6 percent. Business owners with lower credit scores will have to pay more: Interest rates can reach 35 percent or higher to finance a truck. Semi-truck financing for startups can also have higher costs since new businesses haven’t had enough time to build business credit.

Bad credit business loans also come with higher interest rates and loan fees. In addition to your credit score, lenders will also evaluate how much revenue you bring in and any debt obligations. If you have strong revenue, you may be able to get approved for a business loan even with subpar credit.

Loan term

The term of your semi-truck loan will impact how much the loan costs. Typical semi-truck loans last anywhere from one to five years, but it’s possible to find lenders offering term lengths of seven years or longer.

Shorter terms mean higher monthly payments but will be cheaper in the long run because there’s less time for interest to accrue. Conversely, long terms mean lower monthly payments, which can make the loan more manageable, but the tradeoff is higher overall costs because you’re paying for the loan over a longer time.

Banks and traditional lenders often offer long-term loans up to 10 years, while online lenders tend to offer shorter terms, such as five years.

Bottom line

The best semi-truck loan offers a convenient way to buy a necessity for your business while preserving cash flow. Consider your options, such as buying a used truck or leasing, to see if one of those lower-cost options makes more sense.

Understand all your costs before signing on the dotted line, including how much the loan will cost you overall, the interest rate and any fees charged. Then, take the time to shop around and compare lenders to make sure you get the best possible deal.

Frequently asked questions

• Is it better to finance or pay cash for a semi-truck?

  There are pros and cons to financing versus paying cash. Financing is more expensive but lets you buy the truck sooner or keep more cash on hand for other purchases. Paying cash will save you money and help you avoid adding a monthly payment to your budget, but you have to have a lot of cash to buy a truck outright.

• How long can you finance a semi-truck?

  Semi-truck financing terms usually range from 1 to 5 years, though some lenders will finance for seven or more years for trucks.

• Can you finance a semi-truck without a CDL?

  Some lenders will let you finance a truck without a commercial driver’s license, while others will require you to have a CDL and some experience in driving trucks.