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The Cost of Financing Your Equipment

The Cost of Financing Your New Truck

The time has come for you to make one of the biggest decisions of your trucking career. Is it time for you to own your own equipment. Before you fall in love with your new truck, all operators should beware how the terms of a lending decision can affect your overall business outlook.

The Cost of Financing

Knowing how an interest rate effects your overall payment is extremely important for someone who is looking to purchase their own equipment. First, the owner operator wants to ensure they can afford their payments on the equipment. With that said, you can find many calculators on the internet showing how much truck you can afford. Items to consider are the monthly payment, down payment, and interest rate.

Monthly & Down Payment

Getting the monthly payment low enough is crucial for a any owner operator. It is essential that your business is able to cash flow each month you operate. If the monthly payment of the equipment is higher than your income (minus expenses), your business will be failing. To ensure your monthly payment is low enough consider making a hefty down payment on the equipment. If you're unable to free up enough capital for a good size down payment, consider working with your lender to increase the monthly installments of your financing plan. Increasing your loan terms from 48 to 60 months could lower your payment up to 375 dollars a month.

Cost of interest

One other area to consider when purchasing a truck is the interest rate. Many payment calculators allow you to manipulate the interest rate to help buyers understand the terms of their loan. One area to focus on when considering the buy option is to keep an eye on "total interest." This is the cost of the financing being used. An increase of just 0.25% of your loan could cost you nearly $625 over the life of the loan! Knowing how financing can affect your new company's bottom line is essential for the success of your business.

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