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Posted 03/13/2023 by All Business Truks

What are the Pros and Cons of Financing a Commercial Vehicle?

What are the Pros and Cons of Financing a Commercial Vehicle?

Buying your own commercial is undoubtedly a thing to celebrate but have you ever wondered about financing it? Probably not. The reason behind not putting enough thought into the financing approach is, it is quite tedious. Be it semi-truck financing, commercial vehicle financing, or personal car financing, ensuring the most sustainable process of financing is important. Commercial vehicle financing can be a beneficial option if you are experiencing a financial crunch and unable to pay for the truck - it will aid in offsetting the cost. Through this financing, your business will enjoy the benefit of using the vehicle to make deliveries, transport all necessary goods, and most importantly augment growth. 

Regardless of the massive pandemic, there is no doubt that the vehicle industry is still booming. Therefore, if you are someone who has just opened their startup and looking forward to alleviating your delivery system, get some insights into commercial vehicle financing. 

How Does Commercial Truck or Semi-Truck Financing Work?

Semi-truck financing or commercial truck financing can be defined as a way of acquiring funds to incur in purchasing a vehicle, a second-hand vehicle, or for the upgradation of the prevalent truck. Finance nerds might already be knowing that commercial vehicle financing primarily falls under the sphere of equipment financing. This is not similar to loaning personal items, car loans, or equipment. 

It is no wonder that the commercial vehicle you’re purchasing with the financing method will be acting as collateral. The lender will be holding on to the financed vehicles till the time the purchaser is able to pay off the money.  In case the purchaser is unable to repay, their vehicle will be seized for repaying back the amount. 

Commercial Vehicle Financing - Pros and Cons

If you are planning for second-hand commercial vehicle finance or a regular one, there are certain advantages and disadvantages you need to have knowledge about. Commercial vehicle financing can be defined as ownership where your monthly payments lead towards equity in an asset. As soon as the vehicle is paid off, you will be able to drive it without having to make additional payments. You can also trade it for a brand-new vehicle as well. Owning your own vehicle has many advantages that keep on accumulating as time goes on. 

Certain business owners are cautious about purchasing commercial trucks or semi-trucks because of the financial elements. In case your business has experienced challenges in cash flow or had bad credit, it might be a struggle and even cost you quite an amount to secure a loan. But, when it comes to commercial vehicle financing, it might be more feasible for you. Moreover, trucks like every other vehicle depreciate in value over the period. 

Commercial Vehicle Leasing - Pros and Cons

Coming to leasing your commercial vehicle, if you are choosing this, you technically are borrowing the vehicle in return for offering continuous, and consistent monthly payments. Primarily, the majority of regular or semi truck leasing is done for a period of one to three years, and sometimes over that. 

Leasing a commercial vehicle is regarded as a more viable option because of its adaptable nature requiring less commitment as compared to financing. Though paying the fees is certainly mandatory, you will come across reduced upfront costs as well as monthly payments of economical background. 

Just like every other element, leasing commercial vehicles has its own drawback. It necessitates higher restrictions upon usage since the vehicle is not legally in your name. Furthermore, the payments you make regularly are not directed towards you owning the vehicle. Upon completion of the lease, you will be needing to return the vehicle and search for new ones. 

To sum it up, if you are experiencing a money crunch, leasing is always a better option than financing. But, if you are looking forward to long-term planning, financing it is. 

How Can Small-Business Entrepreneurs Obtain Commercial Vehicle Financing? 

There are two main ways that offer commercial and semi-truck financing. Maximum entrepreneurs opt for banks or online lenders for availing of truck loans. Let us get some insights about the same. 

  1. Commercial Vehicle Financing from Banks

You might find it challenging to avail of financing from banks since the truck industry is quite a niche, and therefore, the risk involved is quite high. Though, upon vigorous search, you will come across a few national banks that offer the financing option. But, again, to qualify for the loan, you need to put in some extra slogging. 

  1. Commercial Vehicle Financing from Online Lenders

Greater adaptability, reduced retainment, Swiffer approach, and way more precise - these are a few ways to describe financing offered by online lenders. If you cannot qualify for a bank loan, you can always look up online lenders for meeting your business requirements. Though, they charge higher interest rates as compared to banks.

Now that you have gained a substantial idea of second-hand commercial vehicle finance, or semi-truck financing, it’s time to expand your business goals. 

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