In purchasing a truck to add to your fleet or to start your business, the many options for you to choose from may prove to be overwhelming. Some people may go for a newer truck, particularly if they are looking for a certain feature that is not available in older models. Others may opt for an older truck because these old big rigs are made from more durable materials that are already tried and tested on the road.
More often than not, you will be able to find newer trucks still up for sale in dealerships. On the other hand, if you are looking where to find old semi trucks for sale, then explore online sources where they are mostly advertised. When it comes to financing, there are several factors that will affect your monthly payment for an older or a newer truck. This article delves deeper into financing an older truck vs a newer one.
Principal Finance Amount
The amount that you need to borrow to purchase a truck should depend on your budget considerations. However, for most lenders, a larger principal amount borrowed constitutes a lower interest rate. For instance, if you borrow more than a hundred thousand dollars to finance a newer truck, then you may be eligible for special considerations that pave the way for a lower interest rate. Conversely, you may not get to take advantage of this benefit if you borrow a little less to finance an older truck.
You have the option to choose the loan term that you are comfortable with. Some truckers prefer a shorter loan term because it is most likely that the interest of the loan is lower. However, their monthly payment may also be greater. On the other hand, there are also truckers who opt for a longer loan term duration because in this case, the monthly payments are less. Perhaps the only drawback of a long loan term is that the effective interest rate is also greater.
For older trucks, most lenders only allow a short loan term option, which is usually only up to three years or 36 months. The reason behind this is that older trucks are considered to carry more risks or breakdown. Conversely, when you get a newer truck, a lender may permit a longer loan term duration, which can be up to five years or 60 months.
Perhaps one of the most notable advantages of financing a newer truck is the balloon payment. Typically, five-year-old trucks or older are no longer eligible for a balloon payment which can effectively reduce the monthly payments needed to be made. Nevertheless, for trucks that are under five years old, a balloon payment can be applied, to which the final percentage is determined by the lender.
The way that a balloon payment works is that a certain percentage is taken out from the principal loan amount. The borrower can then choose to refinance the amount taken out at the end of the loan term and keep the truck or choose to trade the truck with a dealer who is willing to settle the balloon payment. With a balloon payment, you will be able to keep your truck or drive away with a newer model after your loan term is done.
When it comes to financing an older truck vs a newer truck, you should consider a number of factors that can significantly affect your monthly payment. Of course, apart from the age of the truck that can dictate its overall cost, the finance amount, as well as the term of your loan, are some other factors that can determine your monthly payment. Rest assured that the best truck that you should go for is one that appropriately fits your budget considerations.