When it comes to financing a commercial vehicle, the rate of interest on your loan plays a major role. The rate of interest can vastly inflate the purchase price of the vehicle, so it’s important to understand how you can get the best possible deal.
Interest rates are determined by a few different factors. These rates also differ based on the lender, the truck you want to finance, and your profile.
In this guide, we’ll break down everything you need to know about the rate of interest in a business auto loan. We’ll also discuss how you can apply for commercial vehicle financing.
How To Get A Commercial Vehicle Loan
Acquiring a commercial vehicle loan is a slightly different process than taking out a personal loan or accessing other types of vehicle financing.
Here are the general steps involved in gaining a loan for commercial trucks.
Step 1: Determine Your Eligibility
The first step to commercial vehicle financing is determining what kind of vehicle loans you are eligible for. This could include buying a new business vehicle or leasing a truck.
Here are the most important factors to consider when determining what kind of commercial truck loans you qualify for:
- Your credit score: The stronger your credit profile, the more commercial vehicle financing opportunities you will have available. This can also affect your interest rates, payment terms, and down payment options. Note that this depends on the lender you use, as some don’t consider credit history.
- Down payment: First-time truck buyers generally make down payments of around 20% to 30%. The larger your down payment amount is, the easier it will be to secure a commercial truck loan.
- Age of the vehicle: A commercial vehicle loan is usually only available to newer vehicles. However, older commercial vehicles can be financed through some providers. While older vehicles may be more affordable, the probable cost of repairs and maintenance will be higher.
- Commercial Drivers License (CDL): While this is determined on a case-by-case basis, the longer you’ve held your CDL, the easier it will be to access a commercial truck loan.
Step 2: Gather Your Documents
Next, you’ll want to get all of your relevant documentation ready before you start looking for a truck. This will make your commercial vehicle loan application a lot easier when you find the right vehicle.
Some important documents include your tax returns, bank statements, proof of insurance, references, your CDL, and possibly your company articles of incorporation and operating agreements.
Step 3: Find the Right Vehicle
Now you can search for your ideal commercial vehicle. Make sure you have a list of requirements for the vehicle and look for a vehicle that best matches all of your specific requirements.
Once you have found the vehicle you want, you’ll need to get a written quote on it.
Step 4: Get Insurance
It’s possible to get pre-approved vehicle financing without insurance, but providing proof of insurance will make the process a lot easier. Ensure you get the right type of insurance for your truck and business.
Step 5: Apply for Financing
Now you can submit all of your documents to a commercial vehicle loans provider. Many different providers exist, offering different types of commercial auto loans.
When applying for a business auto loan, always try to have every document and bit of information you need ready from the start. This will make your application process much easier.
Commercial Vehicle Loan Rate Of Interest: What Can You Expect?
The interest rate is one of the most important elements of your commercial vehicle loan. This is what ultimately determines how expensive your loan will be, and how easily you will be able to pay off the business vehicle.
You can get flexible or set interest rates. Understanding how this interest rate works in your commercial auto loan is essential for determining how viable the loan is.
Interest rates are determined based on a number of factors. These include:
- Credit score
- Driving experience
- Down payment
- Loan term
- Type of vehicle
Basically, when you apply for loans for commercial vehicles, the lender will want to know that you can reliably pay off the loan.
The better you prove that you are a low-risk borrower, the better the potential interest rates you can access.
Interest rates for vehicle and equipment financing are determined on a case-by-case basis. This is why it’s important to compare alternative lenders and different vehicle purchase options to see where you can get the best interest rates.
Many operators will get a standard 10% interest rate in their loan terms, for loans of 3 – 4 years. However, interest rates for loans of longer periods, or borrowers with weaker credit scores, could be around 15% or 20%.
Mission Financial offers some of the most competitive interest rates, as well as access to easy loan pre-approval.
Credit Score Needed To Buy A Semi-Truck
Your personal credit score can play a major role in accessing financing and determining your approved loan amount. All lenders will perform a credit approval process before offering a commercial auto loan.
Lenders typically look for a credit score of around 600 for anyone looking to purchase a semi-truck. This could be higher or lower based on the specific lender.
However, having bad credit won’t necessarily prevent you from accessing a commercial auto loan.
Credit history is just one factor that lenders and leasing companies take into consideration. In fact, many alternative lenders offer financing options for people with bad credit, such as Mission Financial Services. If you can offer the right personal guarantees and pay a solid down payment, your financing options may improve, even if your credit history is poor.
Final Thoughts
When you apply for a business auto loan, it’s essential that you understand your interest rates and how these affect your monthly payments. Getting a good interest rate on your loan can make a big difference in how affordable your vehicle actually is.
Understand what factors affect your interest rate, and make sure that you have all relevant documents to support your financing application.
If you’re looking for the best commercial vehicle loan rate of interest, consider Mission Financial Services. Contact us today for more information!
