First question you have to ask yourself is how good or bad is your credit. If you have good credit will your bank consider doing this deal? Or what about your credit union? If you can get financed through a bank or credit union it will probably be at a good rate and it would make sense for you to do the refinance. If your credit is not so good further consideration is required. Also make sure your current carrier won’t make this complicated for you. Will they release your maintenance account? Will they release the title? We have seen carriers drag their feet on these refinances. Some don’t want you to leave others make the process complicated in hopes you’ll get frustrated and walk away from your truck equity.
It’s important to consider the current market value of your truck compared to how much you owe on it. If the two numbers are close together i.e. you don’t have a lot of equity in the truck it might make more sense to hand back the truck and go out and finance another one. This is assuming of course it doesn’t result in a repossession. Most carriers we have seen will take the truck back without a problem. If you do have a lot of equity in the truck then it makes more sense to refinance it. It’s important not to go by the value of the truck when you first got the truck you want to look at what your truck is currently selling for. A quick look on Truckpaper.com and elsewhere on the Internet will give you a good idea of what the market value of the truck is. One last thing to consider on this is the type of truck you have. Peterbilts and Kenworths will holder value for a longer period of time generally speaking then will Freightliners, Vovlos and Internationals.
Also what is your current monthly payment compared to what your new monthly payment will be after the refinance. Will the payment be higher? Will this fit into your budget? If you’re moving to a new carrier what will your new revenue be? How durable is this new revenue? Will it last indefinitely or is it just a short-term situation? Be sure you’re not chasing a pie-in-the-sky scenario. There are lots of promises made out there in the trucking world. Make sure the offer that’s in front of you can be collaborated with other drivers. The Internet is great for this, but so are your fellow drivers. Lots of things are said on the Internet but the most sincere advice comes from face-to-face conversations with others in the trucking industry. One last piece of advice here is make sure you have your ducks in a row before you approach your current carrier about the idea of refinancing the truck. Once they know you’re leaving they may cut your miles back even further leaving you with no revenue. We have seen this happen several times so be careful.
Don’t forget to consider how many months you have left on your current term. We get calls every day from guys upset with their current carrier and they want to make a move. In some cases we find they only have a few months left on their current contract so refinancing out of their current situation often times will not make sense. Be sure to pencil out what your revenue will be on the remaining term of your contract and compare that to what your new revenue will be after the change and let the numbers make decision. A lot of these guys are angry at their current carriers and they tend to make rash decisions that end up costing them more in the long run.
What will you loose; maintenance escrow, equity, etc. Last thing to consider are things like escrow accounts, maintenance funds, and other administrative considerations. We do a few hundred of these refinances a year and in almost every deal we see the customer getting shorted on one of the above. In some cases we see them only get $.50 on the dollar of their maintenance account or the escrow account won’t transfer because they are cashing the truck out early. Sometimes the trucker doesn’t consider the cost of insurance when they make the move. Driving under the current carriers insurance is cheaper in many cases than if the trucker drives under his own insurance. Make sure you consider things like this before you put this in motion.
There are a lot of things to consider when refinancing out your truck to change carriers. I’ll say it again make sure you do all your due diligence first before you go to your current carrier. You want to be ready to execute what you have let them know of your decision to leave. If you’re thinking of refinancing your truck we would love to talk to you please give us a call at 520-760-3648.