Overdrive Magazine | Trucking Business News & Owner Operator Info
Issue link: http://read.dmtmag.com/i/535950
36 | Overdrive | July 2015 BUYERS' MARKET They fi nanced their 2006 Freightliner initially on a two-and-a-half-year contract with payments at about $1,000 a month. Both that transaction and their 2013 purchase of the 2009 Cen- tury were fi nanced through CFF at "around 8 percent." The most recent purchase remains under a three-and- a-half-year note. "Payments are right on $1,000 again," Jamie says. The Bynums' credit was good enough to avoid subprime rates, but plenty of owner-operators with bad credit are going the subprime route. "There's a whole resurgence of subprime over- the-road fi nance companies popping up," says Manero. The good side is that owner-operators whose credit was damaged in the last recession at least can get a truck loan, even if at rates above the low teens, says Manero. The worrisome aspect is that a high volume of subprime borrowing is often a sign that "everything's overheating a little bit," he says. Manero sees the bal- loon in lending as presaging an imminent pop. "We'll have another cyclical downturn in 2016-'17," he says. Though the Federal Reserve is talking about raising interest rates on money it lends to banks, which indi- rectly aff ects consumer rates, good-credit borrowers should see little change, he says, may- be "a quarter-point or so." Go Capital got in business two years ago to serve the subprime borrower, says Chet Zeken, director of sales, with the vast majority of its deals structured as lease-purchas- es. The Irvine, Calif.-based outfi t has grown from three employees to 70. Zeken notes partnerships with fl eets and dealers as nationwide referral sources for borrowers rejected by other lenders. He says the only customer Go Capital won't fi nance is one "who's in the middle of a bankruptcy or who's had a repo. Other than that, the customer will be automati- cally approved for fi nancing." Zeken declines to specify the current loan rates. Under subprime lease-pur- chase options, if you have to abandon the business, you often do so with no liability for payments. Still, you've essentially rented the truck with high payments and paid for maintenance, says South Carolina-based owner-oper- ator Steve Reichard, leased with United Van Lines. "It feels bad when that happens to you," and you're left with no ability to capital- ize on any value that may be left in the equipment to put toward your next purchase, Reichard says. But a lease-purchase is often the only option for a buyer with a shaky credit history and little to no down payment. It's an option that's much more common among leased owner-operators such as Reichard than among true independents with their own authority. About half the time, these deals are struck with the carrier's leasing arm, according to Overdrive's survey. Vacaville, Calif.-based Travis Fly, also leased to United Van Lines, runs in a 2009 Kenworth T660 with a 485-hp Cummins ISX. It How common are lease-purchases? Among independents with: Among leased owner-operators with: Multiple trucks: 6% Multiple trucks: 24% One truck: 3%* One truck: 18% Among all lease-purchasers taking Overdrive's recent survey, almost half (49 percent) reported working with a carrier-affiliated leasing company to ink the deal, which has both positives and drawbacks. On the one hand, if the carrier truly wants you to succeed, it's got some incentive to provide more miles and better pay. However, a lease-purchase with a carrier-affiliated company can represent a commitment to stay with that carrier through the lease term. While some carriers will allow the owner-operator to take the truck elsewhere, many will not. *Percentages indicate the lease-pur- chase choice's share among all reports from owners on the nature of their last equipment purchase or lease. Where owner-operators buy on the used market Independent used-truck dealer Truck manufacturer-affiliated dealer Private party Motor carrier-affiliated sales wing Auction Other 34% 30% 28% 5% 2% 1% Owner-operators who bought their last truck used reported these sources for the deal: Max Heine Where owner-operators buy on the used market