Are you in need of a truck loan for your business? Whether you’re an owner-operator or are looking to grow your fleet, truck financing options are available to help you afford the right vehicle. With that in mind, here is everything you need to know about getting approved for a large truck loan in Canada.
Key Points
- The high cost of trucks typically means financing is in order.
- Fortunately, financing options are available from dealerships, banks, manufacturers, and private lenders, both for new and used trucks.
- While traditional vehicle loans are used, leasing and personal loans may also be an option to help you cover the cost of a truck in Canada.
What Is A Truck Loan?
A truck loan is similar to a typical auto loan, but is typically more complex and a higher risk for lenders due to their specialized nature and use in business.
- Higher Loan Amounts: Trucks are much more expensive than an average car, which means loan amounts are also significantly higher.
- Collateral: Like a standard auto loan, the truck usually serves as collateral for the loan. This reduces the lender’s risk, but it also means you risk losing the truck if you default on payments.
- Business Use: Truck loans are typically taken out by self-employed truck drivers or small business owners who own a trucking company.
Where Can You Get A Truck Loan In Canada?
Truck loans are available from various sources in Canada, each with its own advantages and considerations.
Banks
Major banks in Canada are often the first stop for many borrowers looking to take out a truck loan. Banks tend to offer more competitive interest rates and flexible loan terms. However, you’ll typically need good to excellent credit to qualify.
Manufacturers
Many truck manufacturers offer their own in-house financing divisions, such as Daimler Truck Financial (for Freightliner) and Volvo Financial Services, for instance. These services tend to offer more specialized loan programs and incentives specifically for their truck brand.
| Freightliner Truck and Big Rig Purchasing & Financing | Learn More |
| Kenworth Truck And Big Rig Purchasing & Financing | Learn More |
| Peterbilt Truck And Big Rig Purchasing & Financing | Learn More |
| Volvo Truck And Big Rig Purchasing & Financing | Learn More |
Dealerships
Getting truck financing from the dealership you buy the truck from makes for a convenient one-stop shopping experience. Dealerships often partner with a network of banks and manufacturer finance services. In this way, you can buy your truck and finance it in one place.
Private Lenders
Truck financing may also be available from private lenders. This may be a good option if you don’t have the greatest credit score, as their lending criteria is more lax compared to traditional lenders. However, loan amounts may not be as high, which can be problematic if you’re buying a truck with a very high ticket price. Interest rates may be higher as well, making the loan more expensive.
Best Business Loan Lenders
How To Prepare To Apply For A Truck Loan
Before submitting an application for any type of truck financing, all business owners or self-employed individuals should make sure they have the following information and documents prepared. Having these documents ready to go before applying will ensure the process can go as smoothly as possible, and you’ll be on your way to getting the financing you need.
Personal Documentation
As the business owner, most lenders will require you to provide the following:
- Government-issued ID
- Social Insurance Number (SIN)
- Address
- Phone number
- Email address
- Personal finance documents
Business Plan
Most lenders want to know what you plan on doing with the money and how it will help you improve your business and grow your revenue. Generally speaking, if you own a business or are starting a new one, you should have some type of business plan written down. If you don’t, this is a great time to get started.
Proof of Assets
Do you own any business assets like real estate, equipment, or vehicles? If you plan on using any of your assets as collateral, proof of ownership, registration, and even licensing information will be required.
Down Payment
By providing an adequate down payment for the truck or other vehicle you’re looking to purchase, you’ll not only reduce your monthly cost, but will also increase your chances of approval. The size of your down payment will depend on several factors, including but not limited to your loan size, the asset you’re purchasing, and even your credit history.
Revenue History & Proof of Income
Does your business bring in enough revenue to cover the cost of the financing you’re interested in without seriously affecting your working capital? Most lenders will require you to have a minimum monthly income before even considering your application. To assess your business health, they’ll often require your bank statement, cash flow statements and other financial documents.
Learn more: The Three Main Financial Statements All Business Owners Should Understand
Advantages Of A Truck Loan
There are several reasons why you may want to take out a loan to finance the purchase of a truck:
- You’ll Own The Truck: Each payment you make towards your truck loan will bring you that much closer to owning the truck. This means you’ll have a valuable asset with equity to be used for future financial uses, like a truck title loan. Or, you may sell it for profit in the future.
- Tax Benefits: When you purchase a vehicle for business purposes, you can deduct certain expenses such as fuel costs, truck insurance, repairs, and even interest paid on a truck loan.
- Spread Out Payments: The main benefit of a truck loan is its affordability. Trucks can be very expensive, making it hard to pay off upfront. With a truck loan, you can spread the costs over several years.
Disadvantages Of A Truck Loan
Along with the perks of truck loans are a couple of downsides to consider:
- Potential For Negative Equity: If the value of your truck depreciates faster than you can pay it off, you may end up with negative equity. This means you owe more on your loan than what your truck is worth. Lenders generally try to avoid this by financing only a portion of the truck.
- Large Down Payment May Be Required: As mentioned above, lenders generally dislike providing loans where the borrower may end up with negative equity. This is because it increases the lender’s risk. As such, many lenders may require you to provide a large down payment, especially if your credit score is a bit low or your finances are not as strong as the lender would prefer.
- Risk Of Losing Truck Possession: If you default on your truck loan, you risk losing possession of the vehicle.
How To Calculate Your Truck Payments And Total Cost
When financing a truck, you need to consider the cost of the loan. Key factors involved in the cost of a truck loan are as follows:
Interest Rate: The interest rate your lender charges is the cost of borrowing. A higher rate will make your loan more expensive over the long run, while a lower rate can keep costs low.
Loan Term: Shorter terms often come with slightly lower rates compared to longer terms, and lead to less interest paid overall. However, monthly payments will be higher. Longer terms tend to come with slightly higher rates and lead to more interest paid over the term. However, they come with lower monthly payments, making the loan more easily managed.
Down Payment: Your lender may require that you make an upfront down payment. While this can reduce your loan amount and the amount of interest you pay overall, it’s a cost you’ll need to cover on your own before the loan kicks in.
Example: Cost Of A Truck Loan
To help you get an idea of how much a truck loan may cost you, let’s illustrate using an example:
| Truck Value | $150,000 |
| Down Payment (10%) | $15,000 |
| Financing Amount (80%) | $135,000 |
| Interest Rate (APR) | 9.9% |
| Term Length | 5 years (60 months) |
| Monthly Payment | $2,861.71 |
| Total Interest | $36,702.78 |
| Total Loan Cost | $186,702.78 |
| Sales Tax On Truck Purchases In Canada Depending on where you buy your truck and whether you’re buying new or used, sales tax will likely apply. You can pay the sales tax upfront when you buy the truck, or incorporate it into the truck loan. Keep in mind that if you roll it into your loan, the overall loan amount would increase, and so would your monthly payments. |
Types Of Trucks You Can Finance
| Flatbed | Learn more |
| Semi-Trucks | Learn more |
| Dump Truck | Learn more |
| Garbage Trucks | Learn more |
| Box Trucks | Learn more |
| Truck Repair | Learn more |
Are There Other Ways To Buy A Truck?
Yes, there are a few other ways you can own a truck, including:
- Personal Loan – This option may be more viable if you’re purchasing a used truck. With this approach, you could use the funds from the loan to cover the cost of the truck, and essentially shop like a cash buyer.
- Lease A Truck – This is a common financing option offered by banks, manufacturer finance arms, dealerships, and specialized leasing firms. By leasing, you can use the truck for a set period without owning it, then trade it in for a newer truck in a couple of years. Plus, lease payments tend to be lower than loan payments.
- Title Loan – If you’re looking to buy a second truck, you can use your first truck that you already own as collateral. This is called a truck title loan. These types of loans can not only help you get a larger loan but can also help you get a better rate.
Final Thoughts
With the right truck loan, you won’t have to worry about coming up with the funds needed to cover a sky-high price tag. Whether you’re an owner-operator or managing a fleet, flexible financing options are available to help you secure the lowest rates and best terms for your needs. Do a little comparison shopping for the best lenders and financing offers available with the help of Loans Canada.
