Overdrive Magazine | Trucking Business News & Owner Operator Info
Issue link: http://read.dmtmag.com/i/709236
August 2016 | Overdrive | 31 I t's no secret that affording a new tractor has be- come more unrealistic for owner-operators and many smaller carriers over the past decade. New trucks are "up to $140,000 to $150,000," says Scott Anderson, Rush Truck Centers senior vice president. Much of the increase has been caused by rounds of new emissions standards, driving up engine costs substantially. In the recent past, purchase of a below-$100,000 truck often came with a "48-month full payout," Anderson says. Traditional loan terms were geared to finishing payments before warranties ran out, allowing many buyers to keep maintenance expenses low and maximize their trade-in value. Now, given the size of monthly pay- ments, he says "60 to 72 months is not unusual." Even 84 months is not uncom- mon, particularly with owner-operators, says Troy Dickens, general manager of Rush Truck Centers in Nashville, Tenn. For a borrower with decent credit, a note at 7 percent interest, with zero down, for 60 months would require a $2,558 monthly payment. Not so long ago, an $80,000 truck under the same terms could be paid off in one less year for just $1,916 a month. "In years 2002 to 2005, owner-oper- ators buying stock trucks were a much larger percent of our sales mix than today," Dickens says. This shift in affordability has made leasing or lease-purchasing a growing alternative. Most owner-operators exer- cising this option favor the latter for the right of ownership it grants, with asset equity at the lease's end. The consider- ations in evaluating any purchase/lease decision include the total cost over the deal's terms, tax implications and indi- vidual long-term business needs. Most owner-operator new-truck cus- tomers stick with tried-and-true purchase loan financing. Anderson estimates 80 percent of owner-operators leave Rush Truck Centers locations with a purchase agreement rather than a lease. "A driver that has a lot of equity, cash to put down, good credit, etc., will likely do a straight finance deal where he is the title holder to the truck" and gets the de- preciation benefit on his taxes, says Todd To lease or purchase? To lease or purchase? Rising equipment, maintenance costs drive closer looks at options old and new for acquiring a truck BY TODD DILLS