Truck leasing has seen a huge uptick with truckers especially during the last few years while the country has been trying to deal with Covid. Automakers like Volvo, Freightliner, Peterbilt and International have all seen an increase in sales across the boards the past two years. Ryder reported a huge $12 billion in revenue for 2022.
Leasing offers owner operators an opportunity to own a semi-truck without a large upfront investment. Leasing also offers the ability to get into a potentially newer truck even if you have challenging credit. However, over time, many truckers may consider buying out their leased truck to own it outright. This can be an excellent decision, but it’s essential to know the steps involved in buying out a lease on a semi-truck.
In this article, we will explore the different options available to truckers looking to buy out a lease on their semi-truck, including the pros and cons, how to navigate the process, and what to expect.
Understand Your Lease Terms
Before starting your journey with the buyout process, it’s crucial to have a clear understanding of your lease terms. Every lease agreement is unique, and the terms may differ based on the type of lease, the duration of the lease, and the leasing company’s policies. A good example is the freight and jobs you can do with your truck. If you are leasing a truck from the company you are hauling for, they may have a clause that requires you to only haul their freight. This means you will not be able to do other jobs outside of what they are offering you. This can be a good and bad thing. If they can provide you steady work to keep you on the road this is great! But on the flip side, we’ve heard of companies restricting their drivers on jobs, which makes it very difficult for them to make a good living. You should carefully review your lease agreement to understand the buyout terms, including the purchase price, buyout date, and any penalties associated with early buyouts. If you have other friends in the business, it would be helpful if they can go over the route they took. They might have suggestions or ideas that can save you time and money!
Determine the Truck’s Fair Market Value
The next step is to determine the fair market value of the semi-truck. This is the price you would pay if you were to buy a similar truck from a private seller or dealer. You can research the value of your truck online through sites like NADA, Truckpaper.com or Truck Blue Book. NADA (National Automobile Dealers Association) is a common tool commercial financing companies use to determine values on commercial vehicles. They have the ability to pull reports and values on a nationwide aspect. Alternatively, you can get an appraisal from a reputable truck dealer or a professional appraiser. The easiest and free way to find out a quick value of your vehicle is jumping online and checking out sites like TruckPaper.com. They make the search very user friendly and you should be able to get an approximate idea on the value of your truck. All you would need is the specs of the truck, the year, make and model and this should give you a good idea of the approximate value of the truck.
Negotiate the Buyout Price
Once you know the fair market value of the truck, you can negotiate the buyout price with the leasing company. In most cases, the buyout price is the residual value of the truck, which is the estimated value of the truck at the end of the lease term. However, some leasing companies may be willing to negotiate a lower buyout price, especially if the truck is in good condition and has low mileage. Keep in mind that if you have a maintenance account with the company and if that holds a balance that will also increase the payoff amount. If the truck is older or has higher mileage, the leasing company might not be willing to extend the lease. This is where you would need to either pay cash for the truck or you need to contact a company like ours to assist with financing the buyout. Step 4 will go into more details about financing the buyout.
Arrange Financing
If you decide to buy out your lease, you will need to arrange financing to pay for the truck. You can choose to pay cash, but most truckers opt for financing to spread the cost over several years. You can finance the buyout through a bank, a credit union, or a truck financing company and that’s where we can help with your semi truck financing. Banks typically require good credit, usually 680 or higher credit scores and 2 years tax returns. Keep in mind, banks and credit unions will require the tax returns to show profitable years back to back. So if your returns are showing a loss or break even, there’s a chance those banks will not approve you for financing. Whereas, our company offers programs for people who have bad credit and who may not have profitable tax returns. We even offer programs that don’t require tax returns. Make sure to shop around and compare terms to get the best deal. If you would like to know what you qualify for, feel free to speak to one of our advisors – 888-565-6692. If you want to read more about our financing programs, you can visit this page on our website.
Inspect the Truck
This step might be overlooked, especially if you have been driving this truck the last two to three years. You might feel that you have a good understanding of the condition of your truck, but it’s a good idea to get a second set of eyes to inspect the condition of the truck. Before finalizing the buyout, it’s essential to inspect the truck thoroughly to ensure it’s in good condition. Check the truck’s engine, transmission, brakes, tires, and all other components to make sure they are working correctly. If you’re not familiar with truck mechanics, consider hiring a professional mechanic to inspect the truck for you. If you are working for a reputable company, they might even do all the maintenance on the truck before you complete the buyout. Several of our clients have told us that their company will do a full inspection of the truck, they even were able to get all new tires, fluids and brakes done with no additional cost to them! So it might be good to ask them if they are willing to do that for you. This can save you thousands of dollars in future repairs and maintenance!
Sign the Buyout Agreement
Once you’ve negotiated the buyout price, arranged financing, and inspected the truck, you can sign the buyout agreement. The agreement should include the purchase price, the financing terms, and any warranties or guarantees offered by the leasing company. We would also recommend that you compare this to the original lease agreement you executed when you leased the truck.
Pay the Buyout Amount
After signing the buyout agreement, you will need to pay the buyout amount to the leasing company. This can be done through a wire transfer or a certified check. Make sure to get a receipt for your payment and keep it in a safe place. If you have obtained financing with our company or another company they will need the payoff agreement and wire instructions. The finance company will also need the original title sent to them once payment has been received by the leasing company. Your advisor will usually work on those details, so you shouldn’t need to worry about that.
Transfer Ownership
The last step is to transfer ownership of the truck from the leasing company to you. The leasing company will provide you with a title and registration documents that you will need to file with your state’s department of motor vehicles. If you have decided to finance the balance of the lease, the finance company might have their own procedures with the titling and registration. Once the transfer is complete, you will officially own the truck.
In conclusion, buying out a lease on a semi-truck can be a smart move for truckers looking to own their own rig. However, it’s essential to understand the lease terms, negotiate the buyout price, arrange financing, inspect the truck, sign the buyout agreement, and pay the buyout amount. Hopefully this was some helpful information to help you start with the process of buying out your lease. If you would like to learn more about our financing options, please call 888-565-6692
