Many of our daily calls come from commercial truck drivers wanting to make the transition to owner operator; how does the financing work? Financing semi tractors depends on many factors and is different from consumer auto loans. Commercial lenders look for your ability and the ability of the truck to repay the loan. Here are the factors that help most often in order of importance:
1. Credit Score - Anywhere above 700 FICO with some depth (cars, houses, credit cards, etc) will get you into the top tier programs for startups, but not by itself. However, a large share of the commercial truck financing market is made up of those with less than perfect credit. There are plenty of programs available for people with bad or no credit.
2. Homeownership - Many programs require homeownership, this also adds to your credit depth for item 1, and combined with other factors will help qualify for top tier programs. Again, not a requirement, there are plenty of programs out there for non-homeowners.
3. Downpayment - Expect to put money down as a first time truck buyer; this is required in all cases. Programs vary from 5% for top tier programs, to 25% for most programs.
4. Truck Specifications - The age and mileage on the truck you want to finance matter. Lenders don't want to put you in a bad situation because then you can't make your payments. The rule of thumb is no trucks over 700k miles, this is more important than the year of the truck. Lenders are always making exceptions on older trucks with low mileage, but NEVER make exceptions on trucks with high mileage; even if it is a Peterbilt;-) The only exceptions I've seen are trucks with rebuilt engines and transmissions. In general a truck 10yrs or newer are preferred, but not always required.
5. Experience - How long have you been driving? Generally 5yrs or more will give you the best opportunity. However, I've gotten customers approved that didn't even have a CDL because they fulfilled 3 of the 4 other factors.
These are some of the things that lenders look at when loaning money to first time commercial truck buyers. In general, the more factors you fulfill the better, the more likely you are to get approved. DO NOT GET DISCOURAGED IF YOU DON'T HAVE AN A+ IN ALL THESE CATEGORIES, Lenders can get really creative and it is best to hear "No" from them instead you telling yourself no. It is important to also point out some deal-killers: delinquent child-support (always), bankruptcies that haven't been discharged yet (most times), and prior auto repossessions (exceptions are made on this with 50% downpayment, or if the repo was voluntary).