by Nick Gromicko

Reliable, respectable transportation is essential for the contractor.  Purchasing the right work vehicle to carry equipment, as well as doubling as a mobile office, is becoming somewhat easier, ironically, as the American car industry is suffering through tough economic times.  Securing the most favorable commercial truck loan will get the contractor on the road more quickly.

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Many commercial lenders will smooth the way for borrowers whose business credit has yet to be firmly established, or whose credit may be damaged, by offering flexible loan options, as well as holding the title to the vehicle as collateral.  Many heavy-duty truck manufacturers, such as Kenworth, GMC and Peterbilt, work with commercial lenders to offer pre-owned vehicles and special financing.

While it’s tempting for the contractor to find the biggest and most flashy vehicle s/he can possibly afford, it’s important to be realistic and think long-term about one of the largest and most expensive equipment investments tied to the business.  The right truck can cost anywhere from a modestly priced $20,000 vehicle to something costing over six figures.

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So, consider the following:

  • Will this vehicle be used mainly for business, or will it double as the primary vehicle for the owner and possibly the family, too?  Either scenario will affect both business taxes and insurance rates, so it’s important to decide, before purchasing, how the vehicle will be used on a daily basis.
  • As fuel costs continue to remain high, with only occasional temporary dips, consider both the type of fuel you want to use and the average miles per day you will probably add to the odometer.  Diesel, ethanol and hybrid options will influence your operating costs down the line, as well as your purchasing decision up front.  Research these options carefully, and don’t dismiss newer technologies just because they’re unfamiliar.
  • New or used?  Your credit rating, financing options and personal preference will all factor into which part of the car lot you’ll be shopping in, either on site or on the Internet.  Consider the safety features and special extras in newer vehicles (such as GPS navigation, storage, plug-ins for laptops and cell phones, etc.) that will keep you roadworthy for years to come.  Some of these newer vehicles may have been recently repossessed and will qualify as pre-owned for a lower sticker price and easier financing.
  • Shopping for the right loan is as important as shopping for the right truck. Affordability is affected not just by how much the bank is willing to lend you, but by whether you can maintain the monthly payments.  The percentage rate and loan structure are critical in determining whether you can afford the vehicle of your choice.  Remember that if you default on your truck loan, not only will its repossession damage your credit rating, but it will also damage your ability to conduct your day-to-day business.  Make sure you consider the monthly amortization schedule of your loan, and bargain for the best option that dovetails with your expected business revenue.  If you have a balloon payment due during a slow season, renegotiate with your lender before signing any documents.  Many online lenders have streamlined the loan process, and many dealers offer the same sort of convenience.  Make them compete for your business by taking time to research your best long-term options.
  • Another loan option includes leasing rather than purchasing your service vehicle.  The primary feature of a lease is that the dealer is responsible for maintenance, and you can upgrade at the end of the term.  But for commercial vehicles, the more attractive plus is that if the vehicle is used strictly for business, the monthly payments are tax-deductible.  Other advantages of leasing include a usually favorable purchase price or buyout at the lease’s termination, or leasing another, newer vehicle, possibly with updated features and improved fuel efficiency, which is another smart move for any small business owner.

Purchasing a new or new-to-you work vehicle is a stressful as well as exciting decision, so mitigate that built-in anxiety by doing your homework and considering all your options before committing to a new rig for the road.

Join our discussion on how contractors should buy or lease a work vehicle.


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