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How Much Does a Semi Truck Cost?
How Much Does a Semi Truck Cost?
Been a company driver for a while? Looking to become your own boss? Then you’re most likely looking to get a new (or new to you) truck! Depending on use, a semi truck can cost anywhere from $30,000 to $200,000. In many ways buying a commercial truck is a lot like buying a regular vehicle but rather than getting you to work and back, your truck IS your work and on long hauls it’s also your home away from home.
Provided below are some ranges and averages of how much a semi truck costs:
|New Semi Trucks||Used Semi Trucks|
As you can see, the prices vary widely for both new and used trucks. This is because there are several things to consider during the truck buying process, which will factor into the overall cost. In this article we’ll explore some the factors that determine the truck’s price and which will help you decide whether you should buy a new or used truck. Let’s jump right in.
New or Used?
Just like regular commuter cars, you can either buy new or used. Both have their upsides and their downsides. When deciding to buy new or used, there are several factors that will help you decide which is better for you - and it’s not just the price.
Buying a New Truck
How Much Does a New Truck Cost?
A new semi truck can cost anywhere from $130,000 up to $200,000. Similar to buying a regular commuter car, options will be a key deciding factor on the price. The difference is that instead of options like leather seats, moonroof, or an entertainment system, your options will depend on the type of load you’ll be hauling and the distances you’ll be driving. Options include things like towing capacity and whether it has a sleeper cab.
What to Consider When Buying New
When buying a truck you should consider new trucks are less likely to break down. You don’t have to worry about what the last person who owned your rig did (or didn’t do) in terms of maintenance. She’s yours to break in. In an industry where even one day of being out of commission can spell disaster for your finances, many truckers like the assurance of reliability that a new truck offers. Additionally, new trucks come with a powertrain warranty so you’ll be covered in the case of failure related to the engine, transmission, drive shafts, differentials, or the final drive.
Another good thing about buying a new truck vs a used one is that you can spec the truck to your exact needs. Depending on what you’re planning on hauling, you can spec anything from the type of engine, transmission, body frame, axles, etc. That level of customization is something you can only get when you buy new. It would be harder to find a used truck that checks off all of your requirements while still being reliable and in good working condition.
The new truck smell is definitely intoxicating, but there are a few things to consider before you decide to buy. Yes they’re new, reliable, but also expensive. This is a no brainer fact but it’s an important fact to take on because you have to figure out whether you can afford the monthly payment on a new truck. When you’re running a new business, you may be running leaner than you want at first and the last thing you want is to have overhead like a high truck payment. In some cases, falling behind on truck payments can even run your business into the ground.
Emissions is another thing to keep in mind with newer trucks, which may not be as obvious. The federal government has mandated stricter emissions standards over the past two decades, which has resulted in changes to the way trucks are made. All trucks made after 2003 are now built with strict emissions standards. Better emissions is great for the environment, but what’s not so great is that engines made to these new specifications are harder to work on and more expensive to fix. This may not immediately impact you, but know that you’ll have to face repairs down the road.
Peace of mind that your truck will run smoothly comes with a price. Bottom line, if the peace of mind that comes knowing that your truck will run smoothly for the foreseeable future is important to you, then it may be worth it to plunk down the extra cost each month. Especially if you see yourself in the industry for awhile, then this is a good move as long as you can afford it. But, if you’re not convinced you’ll be driving 5+ years, then you’re probably better off getting a used truck.
Buying a Used Truck
So we covered new semi-trucks, but what about used trucks? Buying used trucks is the more popular route to go. In fact, 3 out of 5 owner-operators choose used trucks over buying new.
How Much Does a Used Truck Cost?
Used semi-trucks start as low as $30,000-$40,000. Just like buying a used car, the price depends on the general condition and the options on the truck. That’s not bad, but what do you get for that price?
What to Consider When Buying Used
The obvious upside with buying a used truck is the price. Rather than putting down a huge amount for a new truck and getting saddled with high monthly payments, you can buy a perfectly fine used truck. This may be a great option if you’re just starting out because used trucks are easier to pay off and because your income may not be as generous or steady in the beginning. Also, trucks built before 2003 are generally easier to repair because they were made before the new emissions standards.
However, the tradeoff for lower cost is you get what you pay for. If you go too cheap on your truck, it may end up costing you more in the long run. Cheaper trucks likely have a lot of miles on them and there’s a greater chance that the rig will break down sooner than later. If you know how to wrench a car then it may not be that big of a deal cost wise and you may still net out positive over the life of the truck. But if you don’t know how to maintain a truck, then you’re looking at a lot of money going out the window to get your truck moving. Even if you can do maintenance or repairs on your own, can you afford the down time?
With that said, used trucks aren’t bad unless you know what you’re getting yourself into. A cheaper truck with higher mileage could end up lasting you a good while. At the same time, a truck that’s only a couple of years old could have many things wrong with it. As long as you do upfront research on the truck you’re buying you should be okay.
What Should I Check When Buying Used?
Evaluate the Components and Fuel Efficiency
The model of the truck won’t tell you much about the vehicle because they can be spec’d in so many ways. This is why it’s important to evaluate all of the components and how they impact fuel efficiency. In particular, look into the engine, transmission, rear-end ratio, horsepower and torque settings, component weights and weight limits. When you’re searching for a truck, it’s best to have an ideal spec in mind for your particular operation, regions of haul, and expected weight of your load. Your main priority should always be on fuel efficiency and low maintenance cost. Purchasing a used truck that matches your specs can be like trying to find a needle in a haystack. However, the used truck that closely matches your specs will maximize profit for your trucking operation.
Start Your Search
A good place to start your truck search is online. A quick search on Google or your preferred search engine will get you started. In the beginning, try to find trucks that match your specs as close as possible. However, if you’re having trouble finding trucks that meet your criteria, try loosening up your criteria to find more available used trucks. Unless you’re incredibly lucky, don’t think you can start the search in the morning and be in your truck by afternoon. Finding a used truck is a time-consuming process, so give yourself 30 to 60 days to find your truck.
Narrow Your Search
Once you have three to five trucks that fit your specs, rank them in the order of your preference. Use a service like Rigdig.com to run VIN checks on the trucks. This will give you a history of the trucks such as ownership history, insurance claims, accidents, mileage, and more. If anything shows up that disqualifies the truck during your research, remove it from your list and move on.
Once you’ve narrowed down your truck it’s time to reach out to the dealer. Get as much information from the dealer as you can. Find out the truck’s maintenance history, what preventative maintenance was done, the ECM report, what operations the truck was a part of, and whether it’s been parked for an extensive period of time. Have them send as many pictures of the rig as they can and see if they can even send you a video walking through of the truck. If the dealer doesn’t have this information or is giving you a hard time about your requests, it’s time to move on. Cooperation with the dealer is critical during the truck buying process and there are dealers out there that are more than willing to work with you.
Schedule three separate inspections at shops different than the dealer. The three inspections that should be done on the truck are:
Engine Inspection - have the inspection done by the original equipment manufacturer (a Cummins garage should inspect a Cummins engine). The inspection should include the following tests: dyno, engine blow-by, oil analysis, change air cooler, and an overall assessment of whether the condition of the engine matches its mileage.
Front-end Assembly Inspection - Inspecting the front-end gives a good indication of the overall condition of the truck.
Bumper-to-mudflap Inspection - have a well-qualified mechanic inspect the truck front to back and ask them to give you their overall opinion of the truck, including the condition of all major systems. Also, look out for rust as this is an indication that the truck was poorly maintained.
If you choose to purchase the truck, these inspections will give you a very clear idea of what needs to be fixed or replaced.
Should I Buy or Lease a Truck?
The most basic decision you need to make when becoming an owner-operator is whether you should purchase or lease your truck. Either option will get you behind the driver’s seat, but there are several factors to consider when choosing between one or the other. Let’s dive in.
One route you can go is to purchase the truck. When purchasing, you own the vehicle once you pay off the loan (unless you have several thousand dollars lying around to purchase the truck outright, but who has that kind of cash?). Purchasing the truck will require you to make monthly payments to your financing company against the principal and interest of the truck. Payments will be higher in the beginning of your contract but will decrease overtime as interest payments decreases.
Leasing is the same thing as renting except you have the opportunity to purchase the truck once the lease is up. This is how it works: you lease a truck for around three to five years and once the lease contract is up you have the choice to purchase the truck at a predetermined price or what is known as the residual price. Traditionally, not many owner-operators take this route but this practice is becoming more common as the cost for new truck ownership is increasing. Usually when you lease the truck it comes packaged with a maintenance contract where the leasing company takes responsibility of the truck’s maintenance. We’ll cover this more in the next section.
Lease-purchase plans are another path to owning a truck. About a quarter of all owner-operators have purchased trucks this way and it’s a route you can take if you have shaky credit.
What is a Lease-Purchase Program in Trucking?
Truck lease programs are an agreement you make with a carrier where they lease a truck to you and you work for them as a contractor. At the end of a lease-purchase program, you have the option of buying out the truck to become fully-independent.
Lease-purchase programs may seem appealing, especially if you have less than stellar credit, but it’s the most criticized method to truck ownership. Some of the criticisms include abnormally high weekly payments, mileage reduction near the end of the lease contract, undisclosed fees and charges, and the inability to change the leasing arrangement to another carrier. Although all carriers are not bad, some really do care about helping owner-operators develop their businesses. Nonetheless, it’s important to understand all of the potential pitfalls with leasing before making a decision.
The following is some advice when deciding to go into a lease-purchase plan:
Estimate True Costs
Estimating the total cost of a truck can be a tricky thing to do. It’s more than the sticker price. A lot of the cost can be hidden in the interest payments. Knowing the total cost of the truck will come in handy when it’s time to trade in or when you decide to purchase the truck. All too often, when given the option to purchase the truck, truckers realize that the truck is worth less than the amount owed.
Compare Lease-Purchase Programs
If you haven’t been with a company long, you should establish trust with their management team and learn the details of the operation . Once you understand your company’s lease-purchase program, compare it against other carrier programs.
Research Your Company’s Financial Stability
The very nature of the lease-purchase program is that you’ll be tied to the company for the duration of the lease. This means that the company’s health can impact your ability to complete your lease. Because of this, you should learn about the company’s health before going into a lease-purchase agreement with them. If you lease from a publicly traded company you can easily see into its financial health. If the company is privately owned, be sure to ask about the long-term financial prospects and their debt level. Also look into the company’s main shippers and industry it takes loads for. Any negative impacts to the shippers will reduce your miles and destroy the chance of completing your lease.
We also recommend researching the company’s clientele and the industry it moves freight for. If the company works in a volatile industry or if the industry is in a downturn, this may negatively impact the amount of work you can get which will hurt your chances of paying off your lease.
Check Out the Truck You Intend to Lease
Just like with any other method of buying a truck, it’s important to fully understand the condition of the truck you’ll be leasing. For example, you should request maintenance records for the truck and check to see if all recalls have been addressed. Also, it’s a good idea to ask how many times the truck has been leased. This will give you a good indication of the equipment itself but also the lease-purchase program. Numerous leases on a particular truck should be a red flag.
Be Prepared for the Payoff
If there is an end-of-lease balloon payment, you should have a financial plan so you can make the final payment. The key to saving up properly for that final payment is to accurately calculate what you’ll owe compared to the actual value of the truck. This is critical because you don’t want to be underwater on the lease. At the same time, you don’t want to make payments for years, not make the final payment, and come away with no equity.
Understand the Escrow Accounts
It is common practice for a trucking company to withhold a certain amount of the a truckers paycheck for an escrow fund. These funds usually go toward repairs or damages. Some lease-purchase escrows give little to no control over the use of those funds. There may also be a limited balance requirement for the account, which forces you to pay out of pocket for a repair. In either case, make sure that you can get the escrow balances back when you complete the lease.
Good Questions to Ask
Here are some additional questions to ask the carrier before signing an agreement:
- What happens if I want to change carrier?
- Is there any penalty or fee for early payoff?
- Will an accurate account of payment show up in every settlement?
- Will I be able to show a profit after my payments are deducted?
- When will I be able to own the truck?
- What percentage of lease-purchase participants in your plan take ownership of the truck after the lease?
How to Finance a Semi-Truck?
There are multiple financial institutions that may lend money to finance your truck purchase. Here are the most common financing sources:
Banks are typically reluctant to to lend money to an over-the-road truck because they see “rolling collateral” as a risk. However, if you’ve been with the same bank for a long time and have an established relationship with the loan officer, it could be worth the effort to try lending from a bank, especially if your credit is good.
Captive Lending Institutions
What are captive lending institutions? Captive lending institutions are finance companies that are owned by the equipment manufacturers. They’re often more willing to lend money to new owner-operators because they’re in the business of selling trucks.
Used Truck Dealers
Your dealer may refer you to a lender other than a captive finance institute, such as a used truck dealer.
Commercial Lending Institutes
There are finance companies that can lend to truckers, but that aren’t necessarily affiliated with truck manufacturers. However, there are also commercial lending institutes that cater to the trucking industry.
What Affects Your Truck Loan Rate?
There are many factors that affect loan rates, but the main thing that will affect the rate you get will be your credit. Here are some of the major factors that will impact your credit score:
- Credit History: This may be obvious, but people who have good credit history get the lowest interest rate.
- Stable Job History: Job hopping rings alarm bells for lenders. Unstable job history is an indicator that the person lending lacks responsibility or will have unstable income
- Longtime Residency: People who live at the same address for a long time tend to have better credit ratings.
There are different classifications you can be put in based on your credit score. Below is a scale to estimate the rate you can expect based on your credit history:
|Credit Rating||Credit Score||Loan Rate|
|A Credit Rating||700+||5-6%|
|B Credit Rating||650-700||7-9%|
|C Credit Rating||600-650||9-13%|
Anything below a 600 score would eliminate your chances of getting a loan.
Surprisingly, loans aren’t the same across the board - there are a lot of different options when it comes to financing a truck load. The different payment options include:
Variable rates: Most truck loans have a fixed interest rate, meaning that the interest rate will be the same throughout the duration of the loan. Sometimes you can get a variable rate. This can be good if prime rates hold steady or decrease, but you may end up paying more if rates increase.
More Principal Up Front: With this option, you pay more interest payments in the beginning of the loan but pay less over time. Although it’s not ideal in the beginning of the loan, there are two benefits to this: as your truck gets older, you free up more cash to put towards maintenance and two, paying less later allows you to save money to put toward a down payment when it comes time to buy a new truck.
Skip-payment Plan: This plan allows you to miss a payment or two during slow times. This is a perfect arrangement for truckers that haul seasonal freight. A variation of this is having extensions on payments.
Programs for buyers low on cash or credit: For some cash-strapped owner-operators who lack the funds for a big down payment or a favorable loan find success in carrier sales programs. Unlike lease-purchase agreements, buyers do not need to be affiliated with the carrier.
Shorter Loan Periods: Although it means higher monthly payments, some owner-operators choose a shorter loan period to save big on interest payments. 72-month loans are the standard, but you may want to see how a 48-month loan can work for you.
Are you Ready to Buy a Truck?
By now, you should have a good idea whether to get a new or a used semi-truck. But even armed with knowledge, you’re probably still nervous about making this big decision. It’s okay. Just remember that you’ll be fine as long as you remember to do up front research, know what specs you want on the truck, understand the pros and cons of buying used or new, and, honestly, just have fun! Happy shopping!
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