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What is the best way to finance the purchase of your truck?

New truck or used truck, they have different requirements, but new truck can be as big of a money pit as an old one. Do you borrow more then purchase price, for the cost of operation, or do you rely on getting a line of credit for that?

When I purchased my truck, from an individual, I worked for the MC who let me borrow against 401k, which i did. I borrowed $13k, no penalty, paying it back at 6% interest, all to me. This was my operational money fund, to use just in case engine drops out.

I financed purchase price of the truck $22k @14% interest for two years with Navistar, paid it off one month earlier.

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The best way is to use cash. Ok I know that does not work for everyone so the next best is your personal bank, or as you did the truck manufacture. This is something that you need to search your options, I've seen a swing of 4% or more depending on deals a bank or manufacture is running at that time.

I'm glad that your 401K loan worked out for you, but that is a VERY dangerous gamble to take. For example your $13k loan would have been due in full 60 days from when you left the job to become an owner operator, if they would have reported it (I'm guessing they didn't). At that point what ever the balance was, you would owe a 10% penalty plus your tax rate of 15% or more. 25% of $13k is $3,250 due that day.

I would recommend to anyone that wants to buy a truck have a few thousand in saving above the down payment. This number would vary depending on the truck and the carrier they are leasing on to. If the carrier has a fuel card where you don't need to pay up front, and pays at the end of the first week, the amount of saving wouldn't need to be as much.

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IDEA: Discussing your goals with a lender is a great start.

REAL WORLD: Arrange a meeting with a commercial loan officer to discuss your goal of purchasing a tractor. This meeting is key because this is where your relationship with the loan officer begins. Tell the loan officer your goal with enthusiasm. Tell the loan officer why you have this goal. Tell the loan officer your current financial picture. Ask the loan officer for advice on how to improve your credit score and how to improve your income-to-debt ratio and how to become a great qualifier for the loan.

Ask questions!

After one year as a lease operator I requested a meeting with my personal bank's commercial loan officer. The loan officer had very little knowledge of trucking and even less experience with lending money for semi-tractor purchases. I took time to explain the revenues and expenses of my every day operation. I informed him the best I could.

He told me to continue my endevours, continue saving, create a business plan on paper and come back to him in one year.

IDEA: Prove to a lender you can achieve your goals.

REAL WORLD: The proof is in the pudding!

One year later I arranged another meeting with the same commercial loan officer. Discussing matters with the same loan officer is a great practice because hopefully a healthy, ongoing, business relationship has been established.

IDEA: Provide a typed Business Plan, Profit & Loss Statements, etc.

REAL WORLD: Commercial lenders want to see believable business plans. Effectively describing type of operation, projected revenues, and projected expenses make up a simple business plan.

I was a lease operator at my carrier. I set the goal of purchasing my tractor to become an owner operator for my carrier. I had two years of Profit & Loss Statements and tax records to present to the commercial lender. The documents of history enable a lender to determine risk assessment.

IDEA: Provide a Statement of Personal Finances

REAL WORLD: Lenders can provide you with their template Statement of Personal Finances. This document accounts for all things financial in your life from cash to credit cards to retirement accounts to lines of credit to mortgages, etc.

IDEA: Conquer the goal of purchasing a tractor!

REAL WORLD: You had the goal of getting financing for the purchase of a tractor. You discussed your goal with a lender. You took the lender's financial advice. You put it the hard work and sacrifice. You created a business plan. You provided projections. You provided financial transparency. At this point you have almost done it! Now all you need to do is ask, "Where do I sign?"

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