Truck Fleet Financing

Although trains, boats, and planes are essential for many shipping-based industries, commercial trucking is a more versatile and cost-effective way to carry large amounts of goods cross-country. In fact, of the estimated 700,000 trucks in Canada, 420,000 of them are used for commercial transportation.

Shipping companies aren’t the only ones that find trucks useful. Many businesses, entrepreneurs, and truckers looking to start their own operations could benefit from one or even a fleet of reliable trucks. The only problem is that buying multiple trucks can be very expensive. Luckily, there are several ways to finance a fleet of trucks in Canada. 

What Is a Truck Fleet?

Technically, any vehicle that’s used for work by a company or other organization qualifies as a fleet vehicle. Even farming equipment, motorcycles, and other heavy machines could be part of a business’s fleet, as long as they’re driveable or towable.   

That said, the term also relates to the number of vehicles a particular organization has in their repertoire. So, when someone is speaking about a truck fleet, they’re likely referring to a group of trucks that’s owned or leased by some type of corporation.

What a Used Fleet Truck Might Have Been Used For

While the purpose of a fleet vehicle can vary depending on the organization, if you are buying or leasing a truck that comes from a fleet, chances are it was used for:

• Shipping various goods and materials 
• Construction or other vocational purposes
• Carrying large, heavy, or mass amounts of cargo
• Driving long distances or making multiple trips per day
• Dealing with harsh terrain and road conditions
• Advertising the organization it comes from
• Training or rental purposes

Most trucks, whether new or used, can be very expensive, particularly if you’re buying/leasing more than one and you’re looking for top tier models. It will benefit you in the long run to take your time and search for the best possible deal on the most reliable truck(s) you can find.

How Do You Start a Fleet Truck Company?

When building a fleet, it’s also important to know how the trucking industry works, what kinds of trucks are right for your business and what short, medium and long term expenses can be involved with the financing and aftercare processes. 

Don’t worry, there are a few steps you can take to get started buying or leasing trucks for your fleet, such as:

Create a Business Plan

It’s a good idea to formulate a viable business strategy, so you can show it to whatever lenders or other entities you’re working with. Within your plan, don’t forget to include all the essential details, such as your:

• Desired market & clientele
• Projected revenue & profitability
• Current debts & financial health
• Driving team, employees & partners 
• Assets & liabilities (properties, existing vehicles, etc.)
• Estimated expenses (salaries, maintenance, fuel costs, etc.)

Most financing sources are more inclined to approve clients for better loans or leasing deals when they have a good business plan to present, along with strong finances. 

Decide Which Equipment to Buy or Lease

Next, figure out what types of trucks you need in your fleet and how you will cover their base costs. In both cases, there are a few factors to consider, such as:

• Whether you want newer, older, or pre-owned models
• Whether buying or leasing will provide the best deal
• Whether you want to own your trucks or cycle through different models
• How you will use your trucks (hauling cargo, transporting equipment, etc.) 
• How will you carry items (trailer, cargo box, etc.)
• What distances/roads the truck will cover (highways, urban areas, etc.)
• What costs you’ll face later (repairs, fuel, insurance, etc.)

If you’re planning to finance or lease your trucks, rather than purchase them privately, they might qualify as business equipment. So, you may need to apply for an equipment loan or leasing contract, both of which can be found through various sources and involve different initial costs, approval requirements, and payment plans.

Hire Your Drivers and Fleet Management Team

A truck company is only as good as the people who run it. Not only should you have a good staff managing your trucks, but your fleet should also be made of drivers that can operate such large vehicles in all sorts of road conditions. When choosing drivers, you’ll have two options:

• Subcontractors – The cheapest way to get your fleet up and running is to hire independent owner-operators since they usually have their own trucks. Then again, while buying and maintaining the trucks is less problematic, you may pay more to compensate the drivers and subsidize the costs they incur on the road. 

• Employees – If you already have several trucks, would like fewer financial and legal issues to deal with, or just want more control over your fleet, it may be better to add truckers to your official staff. However, your fleet’s startup costs will be far greater, as you’ll have to finance, fuel, and maintain all your trucks. 

Check out our guide on business payroll taxes and deductions.

Understand Your Operating Costs

When starting any business, especially one that involves trucks, be realistic about the expenses you could encounter and consider more than just the price of the vehicles. Other short, medium, and long term truck fleet costs can include but aren’t restricted to:

• Interest & fees
• Licensing & registration (for multiple vehicles)
• Insurance (for drivers, in-house staff & vehicles)
• Other vehicle costs (fuelling, maintenance, etc. ) 
• Driver & in-house staff expenses (salary, daily living, etc.)
• Buying or leasing real estate (storage, warehouse, etc.)
• Advertising (web content, signage, etc.) 
• Legal or financial issues (lawsuits, debts, etc.)

Consider a Factoring Company

If your business is expanding rapidly but you’re not seeing the revenue you hoped for, you might have trouble paying all your debts. In that case, utilizing a factoring company could be a great option.

Factoring companies cover the invoices your business accumulates when customers don’t pay on time, in exchange for a percentage of the revenue you make from them afterward. They do this by buying your accounts receivable at a partial discount.

Should I Buy or Lease a Fleet of Trucks?

Most tucks can be pricey, particularly for newer or multiple models. So, you may need to finance your trucks over time, in which case you’ll have two alternatives:

Buying a New Truck to Add to Your Fleet

If you have the funds or are planning to get a loan from a financial institution to pay for a fleet truck, there are many factors that make ownership a better alternative than leasing.

Pros

• Once you own a truck’s title, it will qualify as an asset, so you can use it as collateral to finance other things (business loan, equipment loan, etc.)

• As business expenses, any value your truck loses and even some related costs (fuel, etc.) can be deducted from your taxes and used to offset your profits.   

• There are fewer limitations compared to leasing. As the owner, you won’t be charged for wear-and-tear, breaking your lease, or adding too much mileage to the truck.

• You’ll have more say in what happens to the truck. You can have your own mechanics work on it or sell it and invest the proceeds into your business. 

• If you pay less for the truck than it’s worth on the market, you will have positive equity, which you can also reinvest into your company.  

• Buying and selling trucks individually can lead to lower net depreciation and even help you save a bit of money over time.

Cons

• Since you’re purchasing the truck and will be more responsible for it, the startup costs can be higher than leasing.

• There is more documentation and minor costs to deal with (license renewal, property taxes, title retention, etc.).  

• Loan plans are less flexible than lease programs. You may be locked into your contract for longer and cannot switch your truck for another model.

• Some trucks depreciate rapidly in value over time. You may end up with negative equity if you pay more for the truck than it’s worth. 

• The trucks you can afford or have access to may not be in as good condition as leased vehicles. They may be older, more driven or need immediate repairs.

• You will need a warranty to cover certain repairs, whereas some leasing programs include basic maintenance issues.

Don’t know which truck to buy? Check out our review on Peterbilt and Volvo. 

Leasing a New Truck to Add to Your Fleet

If you prefer to consistently exchange your fleet trucks for newer models, leasing them over the years may be actually better than buying them. 

Pros

• The startup costs are generally lower. No down payment, less paperwork and fewer hidden fees. 

• The costs associated with a lease are more predictable than some loans. The size and frequency of your payments may also be more adjustable. 

• You can choose a closed-end lease with a fixed payment term or an open-end lease with an option to sell the truck when your variable term ends. 

• Leased fleet trucks are typically newer models with few or no maintenance issues, more features and better fuel economy.

• You’re less liable for any issues with the truck, such as mechanical problems, depreciation, a low debt-to-equity ratio or its future sale/replacement/disposal. 

• You can negotiate a shorter payment plan, potentially allowing you to sample a variety of vehicles over time and save money in the process.

Cons

• You won’t own the truck’s title. It won’t increase your net equity and you can’t use it as collateral or reinvest the equity in your company. 

• Most leases are restrictive when it comes to the amount of mileage or wear-and-tear you’re able to put on the truck without penalty.

• You can’t sell, trade or scrap the truck. Most leases lock you to a specific vehicle until your term ends (unless you want a penalty for breach of contract)

• In the long term, continually leasing fleet trucks can be less cost-effective and financially beneficial than buying and selling them.

How Can I Finance My Fleet Truck(s)?

Luckily, there are several ways to finance an otherwise unaffordable fleet truck. Before you get started, be sure to research each option and compare offers in your area:

• Traditional Financing – A bank or credit union may offer you better loan conditions, interest rates, and security than other lending sources. However, you won’t find any leasing deals and getting approved can be difficult if your business doesn’t have strong finances, credit or collateral. 

• Alternative Financing – There are plenty of alternative and vehicle-based lenders that will offer you a loan or lease, even if your business has bad credit or low revenue. That said, the conditions and rates can be less appealing. Additionally, subprime lenders are less regulated than banks and credit unions.

• Dealers, Manufacturers & Fleet Owners – If you can’t find a good lender, you may be able to buy or lease your truck straight from the source. Although approval requirements can vary, some of these sources will give you better deals and extra benefits if you’re a returning customer with a solid payment history.

Contact Loans Canada to Finance Your Truck Fleet! 

If you’re looking for a loan or lease to cover the cost of one or more fleet trucks, Loans Canada can help you find the best deal for your business. Call us today or check out our website for more information about truck fleet financing in your area.