FAQ’s About Financing A Commercial Truck
Q: Are monthly payments necessary?
A: Unless you’re in the position to pay cash for a new or pre-owned truck, you’ll need to establish a payment plan to obtain that vehicle. Two options exist – taking out a loan or leasing.
Q: How do loans and leases differ?
A: When you take out a loan, all of the money used to pay it off applies to your eventual ownership of the vehicle. The initial down payment and principal on the loan cover the total cost of the purchase. Lease payments, however, apply only to the use of the vehicle. The total sum of payments covers the vehicle’s depreciation over the time you drive it and is usually less than the outright price of the vehicle.
Q: When is ownership transferred?
A: When paid in full, a loan terminates and you assume ownership. When a lease period ends you give back the vehicle to the lessor, unless the lessor offers to sell the vehicle afterward. During the entire lease period the lessor maintains ownership and simply allows you to use the truck. Ownership is only transferred if you chose to buy the vehicle after the lease terminates.
Q: How are loan rates determined?
A: The size of monthly loan payments depends on the amount borrowed, the length of the loan, the interest rate and other factors such as your credit history. Paying more money initially lowers the principal of the loan, thus reducing individual payments. At any period during the loan you may opt to pay off the principal in its entirety.
Q: General Loan Specifications:
A: Down payment amounts may range between 10 to 20 percent of the vehicle’s total cost, although some purchases require no down payment. A typical loan period is five years with an annual percentage rate around 8 percent. Some financial institutions offer lower rates, but be sure to investigate any associated conditions or clauses.
Q: Can extra fees and charges be financed?
A: Yes, registration, taxes, extended service plans and other supplemental charges may be included in the financing plan.
Q: Is GAP Insurance necessary?
A: Yes, GAP Waiver insurance provides additional protection for your assets. In the case of a “total loss” due to theft or collision, GAP insurance covers the amount on a loan that is the difference between the asset value and the amount covered by another insurance policy.
Q: What option makes most sense?
A: The answer to this question depends on how you plan to use the vehicle. If you like the idea of driving a more expensive truck for a smaller monthly payment, leasing is a great option. However, if eventually owning the truck is important, financing with a loan is the way to go.
Q: Why Lease?
Unless you’re in the position to pay cash for a new or pre-owned truck, you’ll need to establish a payment plan to obtain that vehicle. Two options exist – taking out a loan or leasing. Learn more about Bergey’s leasing services today.