In need of a tow truck for your business... that won't hurt your cash flow?
Then new or used tow truck leasing might just be what you need.
Tow truck loans can prove to be the more beneficial option for your business in the long-run. Obtaining a new tow truck is not a cheap task, and can undoubtedly put a dent in the bank. And this does not factor in repairs, radios, accessories and upgrades that you may find yourself needing in the future.
If you are looking to avoid dipping your hand too much in your wallet whilst enjoying a new or used tow truck, then tow truck financing is the best option for you.
In this article, we will discuss how tow truck loans work and the different factors that may affect the tow truck leasing rates as a new business and an existing tow truck company.
Tow Truck Leasing for Businesses with Good Credit and Startups
Owning several tow trucks does not increase your business’ revenue.
Rather, it’s their use and overall productivity that generates the profit for your company.
This begs the question: Why use up half of the money in your bank in order to buy a new tow truck when you can just lease and use your cash on things that appreciate?
Many businesses that deal with tow trucks are only now beginning to realize the benefits of tow truck leasing and tow truck financing.
Those who have not jumped the bandwagon have not done so for one reason - they do not know what it is and the benefits of tow truck leasing and tow truck loans.
So, what exactly is tow truck leasing?
What Is Tow Truck Leasing?
Tow truck leasing is a type of leasing and financial arrangement.
A person, business owner or a company pays another entity accordingly to be able to use a tow truck for a specific period of time. In this contractual arrangement, the lessee pays the lessor an amount of money subject to the terms agreed to acquire temporary rights to use the tow truck.
What are your finance options for your selected mode of tow truck leasing?
Tow truck leasing companies may offer you a $1 buy out lease, 10% PUT Lease, FMV buy out lease (lowest tow truck financing rates) or a simple equipment finance agreement where you remain the owner the entire time and just make monthly payments back to the bank. The equipment financing agreement will usually come with the best early pre payment options.
Tow Truck TRAC Lease – A terminal rental adjustment lease (TRAC) gives the advantages of tow truck leasing as well as provides you with the option to purchase the tow truck at the end of the lease. This primarily gives you 3 benefits. Firstly, you have the option to buy the tow truck or buy another tow truck when the lease is over. Secondly, the sale price of the tow truck is predetermined so you do not have to negotiate or secure a price on the tow truck at the end of the lease. And lastly, you have the option to either choose a low purchase price and a higher monthly payment or make low monthly payments and opt to pay a higher purchase price at the end of the lease term.
$1 Buy-Out Lease – Also known as a capital lease, this allows the company to lease the tow truck for the set period of time and then buy it outright at the end of the lease for $1. The monthly payments for this lease are likely higher than other leases, but it comes with a $1 buy-out at the end of the lease, so tow truck financing companies may spend less money long-term.
FMV Tow Truck Lease – Also know as an operating lease, a Fair Market Value lease lets the company use the tow truck for a pre-determined amount of time. It gives a few end-of-lease options, including continuing to lease the tow truck, returning the current tow truck and upgrading to something new, or purchasing the tow truck at it’s fair market value price.
10% PUT Lease – A 10% Purchase Upon Termination lease reduces the total lease amount so that the financing amount is 90% of the total cost of the equipment. At the end of the lease terms, the company has a chance to buy the tow truck outright for the final 10%.
TTFA – An Tow Truck Finance Agreement is kind of a combination of a lease and a loan. However, the tow truck finance company does not put collateral on everything your business owns like a bank loan would do. You own the tow truck through out the term. The financial institution will be a lien holder on the truck. You will be able to take advantage of section 179 benefits with this finance option.
Tow Truck Leasing for Startups and Businesses with Good Credit
If you are merely starting your operations, you may think that you have minimal chances of getting tow truck leasing for your new business..
However, this can be the least of your worries. Leasing a tow truck is still achievable, regardless of your period of operation or average credit score.
Businesses With Good Credit
If you’re a business with an average or “good” credit rating on D & B, you have nothing to fret about.
When it comes to tow truck leasing, while a perfect credit score can help your application move faster, it does not have to necessarily be the case.
The conditions that can affect your application for getting the best tow truck leasing rate are:
- Your business must be operating for at least 2 years.
- Although credit scores are not a problem, it is an easier process when your credit score is over 625.
- Be mindful of the age of the truck you plan to lease. It would be best if the tow truck isn’t really older than 7 years. There are tow truck lenders with no age restrictions for tow trucks.
Startup businesses often face the hardest time when it comes to leasing a tow truck.
However, if you’re able to provide a 625+ credit score and are looking for a fairly new tow truck, then applying for a lease will be easier. A simple one page application with your name DBA your business name to get pre qualified with most tow truck lenders.
You must also consider the amount of money your startup is willing to shell out for the lease. Lenders often require startups with 650 fico score or better to provide at least 10% of the money as down payment with proof of money leftover to pay the lease.
If you have a 680 fico score or better you might qualify for no payments up front or one payment up front and application only up to $80,000.00
Industry experience helps get start up businesses approved.
Benefits of Buying Used Tow Trucks Through Leasing
Leasing is a good option for business owners who want to save their working capital for other unexpected expenses of their business. Acquiring a used truck through leasing, however, is another option that can be healthy for your business.
There are several benefits that you can receive if you decide to do the latter. Examples of these benefits are:
1. A Lot of Options to Choose From
Leasing tow trucks allows you the flexibility to choose from no payments for the first three months payment structures or $99 for the first 6 months followed by terms up to 72 months. To allow your business time to start generating profit with your tow truck before your regular payments begin.
2. You Avoid Rapid Depreciation
Buying a tow truck is costly.
You would also have to consider that, in 2-3 years, tow trucks lose half of the value they had when they were first acquired. In short, when you buy a tow truck, you will only be able to use its full value in its first year.
Leasing can help you avoid that mistake. Upgrade your tow truck and the end of the lease.
3. What to Look for When Buying Used Tow Trucks When Leasing
To help you get the most out of buying used tow trucks through tow truck leasing, here are important tips to keep in mind:
- Look for a tow truck that is 7 years old or newer. Trucks last a long time so having one that is only a few years old can be a good investment in the long run.
- Know the towing capacity of the tow truck. This is important especially if you’ll be using the truck to tow a trailer.
- Have a pre-purchase inspection done by a professional mechanic even when the tow truck has a high-reliability rating. You have to make sure that you check any signs of extreme wear and past uses. Especially when buying a tow truck from a private party.
Benefits of Used Tow Truck Leasing from Auctions
One not commonly known fact about tow truck leasing is that used tow trucks can also be leased from auctions. This is another option that can be considered when you are looking to not spend as much money on leasing a fairly new truck.
In addition to cost, here are the benefits to leasing used tow trucks:
- Used tow truck leasing require lower monthly expenses, which means you can easily increase your profit margin.
- Leasing usually requires you to pay only for the first and last month of use as your down payment. This method can help you in preserving more cash for your business.
- Leasing is a monthly expense but is not considered as a long-term debt. This can help you have a better balance sheet for your business.
- You’ll always have a choice on what you plan to do to the truck at the end of your contract. You can either buy the truck according to its residual value or let the dealer dispose of it.
- When you lease a tow truck with an FMV or open ended buy out, you can write off 100% of your payments off of your taxable income.
Tow Truck Leasing Rates for Your Business
Payments for tow truck leasing can vary. Rates for your desired tow truck lease will depend on various factors.
This guide for the different leasing rates can help you get a better idea of the payment scheme.
Tow Truck Lease Rates
Here’s an example of a tow truck leasing scenario (for reference only):
Consider a tow truck that costs $60,000.00
How much will you be paying monthly for a tow truck if your credit is considered?
- For a very low-risk credit, your monthly payment is around $1,157 for 60 months.
- If you have a moderately risky credit, your monthly payment is around $1,334 for 60 months.
- High-risk credit profiles,your monthly payment is around $1,761 for 60 months.
It's best to contact a professional tow truck leasing agent for lease rate factors and other payment scenarios unique to your situation.
Use our tow truck loan calculator to calculate how much your tow truck financing payments could be and how much of a tow truck you can afford to buy based on your monthly budget.
How to compare so many tow truck lease offers?
When comparing your offers. Make sure to write down and compare all of the following the length of the term, total final tow truck finance amount, monthly payment, money due up front and buy out at the end of the tow truck lease.
Use our tow truck loan calculator to calculate your tow truck financing rate.
Factors Affecting Tow Truck Leasing Costs
Naturally, when your credit score is lower, your payments will go higher. There is also the factor of the length of time you’ve been in the business. The less time you are in the business. A new or startup business is less than 2 years time in business, it’s highly likely that your payments will be higher.
Here are other factors that can also affect the payments or costs of your lease:
- Age of the truck.
- Your chosen tow truck lessor (is it a tow truck dealer, a bank or a tow truck leasing company?)
- Size and amount of the tow truck.
- Leasing duration.
- Industry experience
- Business credit history
- Business Cash flow
Final Thoughts on Tow Truck Leasing for Businesses with Good Credit and Startups.
In this article, we discussed what tow truck leasing is, the different tow truck loan options, the benefits, and what your tow truck lease rates could be. Tow truck leasing is a financial contractual arrangement that helps a person use a truck in exchange for payments to be made depending on the agreed terms.
Ready to Apply online for a Tow Truck Loan? Feel free to call Trust Capital and speak with a tow truck finance specialist that can take your application over the phone and give you a no obligation tow truck financing quote at 866-458-4777.