Overdrive Magazine | Trucking Business News & Owner Operator Info
Issue link: https://read.dmtmag.com/i/963441
April 2018 | Overdrive | 37 There are some expectations that interest rates might creep upward, given moves at the Federal Reserve to raise interbank lending rates. Yet there remain plenty of financial institutions "pushing to lend on the commercial side," Daily says. Interest rates are low and have changed little of late for truck loans, says Lloyd Baldridge, Nacarato chief finan- cial officer. Strong-credit borrowers with an established history in the trucking business might expect to do as well as 5 percent on a new-truck loan and two times that and more for a used purchase with a shorter term. Where Baldridge has seen "real change" is in lenders expecting a little higher down payment to keep inter- est rates low. That might not be such a problem for operators who can weather the electronic logs change without their revenue being hurt. Industry forecasts have called for continued rises in freight rates and volume – the former of which has moved upward considerably since hitting a seasonal trough last summer. The decisions to buy, and whether to buy new or used, will hinge on business needs, availability of credit and capital for a down payment, and the operator's risk tolerance. USED: Lower costs ease the risks of expansion for small-fleet owner Howard Logistics small fleet own- er-operator William Howard of Crossville, Tennessee, visited Landmark International in nearby Cookeville recently as he contemplated purchasing some trucks. Given demand for his regu- lar brokered hauls of chicken outbound from Crossville into North Carolina and general freight back, and favorable eco- nomic conditions, Howard says he could go from his current five trucks to 15 tomorrow and "wouldn't be hurting for loads. My concern, of course, is finding and keeping drivers." He's been weighing his options for buying used or new. "It's really just kind of a time in trucking where you don't know what you need to do," he says. "We're needing to grow, but there's so many things you have to consider." Howard, 37, bought one truck in late 2016 and another two in early 2017, all brand-new International ProStars powered by the 15-Liter Cummins ISX option, financed with zero down through a local bank on a seven-year note. But given drivers are "hard to come by with all these rules they're putting in," the ELD mandate in particular, he's lean- ing toward used purchases. Generally smaller payments on the note mean a used truck "doesn't cost you as much if it sits" unused for a time. With his prior trucks purchased new, he hasn't experienced the high-dollar emissions-equipment failures so many have in years past. Purchasing used, however, could be a gamble in that regard, particularly if the truck was used in a vocational or urban application, or if the driver was a frequent idler, all of which stresses the emissions systems Owner-ops' most recent truck acquisition: Used, new and leased Purchased used More than five years old 31% 3-5 years old 16% Less than 3 years old 7% Straight lease and lease- - purchased new or used 8% Purchased new glider with reman engine 12% Purchased new 26% Since Overdrive's 2015 Truck Purchasing survey of leased and independent owner-operators about their buying habits, there's evidence a larger share of operators have moved in the direction of new trucks. In 2015, only 23 percent of survey respondents reported having purchased their last truck new. In this February poll, 26 percent reported buying new. What's more, the share of respondents who had purchased new gliders quadrupled from 3 percent to 12 percent during the interim. Meanwhile, used trucks remain attractive, principally because of lower down payments and/or monthly payments. Nacarato Volvo Trucks' location in La Vergne, Tennessee, has seen an increase in owner-operator and fleet purchasers, says General Manager Pat Daily (pictured). Many of those purchasers are opting for new units, two shown being prepped for delivery. Nacarato Volvo operates five facilities in Kentucky, Tennessee and Georgia. Small fleet owner William Howard, shown with one of his 2017 International ProStars, has been contem- plating purchasing a series of used trucks to keep up with freight demand with a regular broker custom- er. As Howard considers expansion, his principal difficulty is finding available drivers, and his calculation around the choice to buy used takes that into account, since a used truck note would be less of a burden if the rig had to sit for a time.