Cash or loan for truck?

[motomorph]

I have been driving for a few years now and would like to become an o/o. I have about $20k for a truck and I was wondering if I should buy my current boss' 1989 Western Star with a 3406B cat for $18K, which I have all service records for; Or should I put money down on a more aerodynamic newer truck? Western star has about 100k on rebuilt engine, new rubbers all the way around, new seats, and much more. Any info would be appreciated.

[Truckdobe]

I'd buy the Star; they're good trucks, it's got one of the best motors ever built and you know the truck. CASH is always the way to go. In '89 it may be geared a little slow, but they can get decent fuel mileage if driven properly.

[tootie04]

I would go for the star too....you know the truck and that is a real PLUS!! I dont know if I would spend all my capital on the truck though....do you have other money set aside on top of the 20K ??

tootie

[Truckdobe]

Everyone should always strive to have at least 3-6 mos of expense put away. Even more so if you have an income that fluctuates, but I'd still rather spend the cash on the truck, it's easier to put it back if you're not making payments and if anything happens and you are down you don't have that nagging payment to deal with.

As for the B model, having had Bs, Cs, Es and now an ACERT; the 'B' was/is the best by far. Our '87 is in the shop for frame off restoration right now, after driving her to the shop over the weekend I didn't even want to get back in and drive the '07 ACERT... love that B!

[motomorph]

I have about $60k but I need to buy a trailer, pay for insurance, plates, and all that good stuff.

[Teal 95 KW]

I've driven a couple of B model Cat's before, and I must say that I love my E model. I don't care for the Acert's drove a few of those, and they are dogs, my little ole' "modded" 475 does what I ask of it, and has more than enough power on tap. I drove a fella's '86 359 with a b-model cat, 13 speed and what I believe to be a 3.70 rear gear, and it was overly touchy on the throttle and lacked pulling power big time. I guess it's about as simple as a plate of rice, so that's a plus.

[Truckdobe]

"overly touchy on the throttle".... I like that! That's what all of the engines since the 'B' have been missing; instant throttle response, I LOVE it!!!

No, out of the box no on-highway 'B's were built with enough HP to really compare to those of today, but a quick trip to a performance shop will fix that. Our last mechanical dyno'd 583 to the ground with very few changes and put out over 2300 ft lbs of torque; no problems running with the modern equipment and got decent fuel mileage.

We ran it that way for years (until it was stolen) with no driveline issues running the original 1450 clutch and tranny.

The first time we ever drove an 'E' neither of us could shift it because the throttle response was so slow. We swore we'd never buy one, but when the old truck got stolen, it was replaced with a truck that had an 'E' and we settled in and actually wound up liking it well enough... just missed that throttle response.

[Jumbo]

What kind of trailer do you need to buy? Good flats can be had for a decent price.

[Teal 95 KW]

My '95 475 has a LOT better throttle response than my cousin's '99 model 550. Both are e-model Cat's, mine is louder (engine noise and exhaust wise-both have 6" straights and his is only loud when the jakes are on) his runs smoother, and mine is kinda hard to stand infront of and carry on a conversation, the guy who had it before me had gotten into the computer and a bunch of other crap.

Anyway, I would say you can't go wrong with the CAT motor, I've drove Detroit's and Cummins' powered trucks and I wasn't impressed with them at all loaded or empty.

[pepe4158]

hmmm the advantage over knowing the truck you have now seems invaluable and quite an asset, I would make my decision baised on the facts only you are privy too versus buying anyone elses old headache.
And brand new prices are like, 'ouch' do you really want payments?

[special k]

I'd go for the Star but try to get a little better price it is a 89 and old trucks like go for next to nothing on the wholesale market. If you've been working for him for a while he should help you out on the price a little.

[GMAN]

I would go with a truck that I could pay cash. The B model CAT's were not really known for their fuel economy, but some consider them one of the best engines CAT ever made. As long as the truck is in good shape and you feel comfortable with it, I would opt for the paid off truck rather than having a truck payment. You have a lot more flexibility when you don't need to worry about making payments. You can always trade up later.

[heavyhaulerss]

before you buy truck. check with potential co's that you may want to lease to. some co's have rules that require truck has to be no more than 10 years old.

I have a 2001 Star and have owned it since last September. I haven't had any real problems with it. Mine has a Detroit 60 and runs great. The truck itself is solid, quiet and rides real nice with the trailer attached. I have a 2005 Great Dane flatbed and paid $17,000. It was in perfect shape with all new tires. Not so new anymore though!!!

[GMAN]

before you buy truck. check with potential co's that you may want to lease to. some co's have rules that require truck has to be no more than 10 years old.

That is a good point. However, most of the better paying carriers won't care about the age as long as the truck is in good shape and looks decent. I met a fellow once who had an old truck that he had gone completely through and was in great shape. He had to show his company receipts where the work had been performed. He didn't have a problem with them afterwards. By the way, rebuilding a CAT engine can run from about $10-18M.

[Dejanh]

I would not reccomend cash for anything....

Remember, smart and succesefull buisiness people let other peoples money work for them while they save theirs, Even Donald Trump deals with banks, not his own savings account :wink: , + interest is tax dedustible as i have come to find out on my last tax returns since i payed less to uncle sam..

I can see how some think that paying cash up front is a good idea, i was one of them..

[Truckdobe]

before you buy truck. check with potential co's that you may want to lease to. some co's have rules that require truck has to be no more than 10 years old.

I'd keep shopping for a carrier if that were the case, as long as the truck is sound and looks presentable it's no one's business how old it is. I have NEVER had a broker or a direct customer ask how hold my truck was/is. Those age limits are to keep the little folks taking the crap b/c they have to make payments IMHO.

[GMAN]

I would not reccomend cash for anything....

Remember, smart and succesefull buisiness people let other peoples money work for them while they save theirs, Even Donald Trump deals with banks, not his own savings account :wink: , + interest is tax dedustible as i have come to find out on my last tax returns since i payed less to uncle sam..

I can see how some think that paying cash up front is a good idea, i was one of them..

I don't think most new owner operators need to worry much about paying a lot in taxes the first year. There will be a lot to write off. During the first year or two, I would be more concerned with making money. Avoiding or reducing your tax bite can come later. You can always buy a newer truck later, which could reduce your tax bite with depreciation. It takes a lot of pressure off to not have truck payments. There is some validity to your point about reducing taxes by paying interest. But you are still paying out the same dollars, just to the bank rather than the government. I would encourage those who can pay cash starting out, to do so. There are a number of other ways you can reduce your taxes other than accumulating debt and financing your purchases. You can set up a 401k, IRA, buy real estate, and other investments which offer the tax shelter, but accumulate in value. You will NEVER accumulate wealth by spending money. You accumulate wealth by keeping debt low and making your money work for you. People like Donald Trump have a lot of assets, but not so much net worth due high debt. At one time he was all but bankrupt because of high debt. He was put on an allowance and control of his business was essentially turned over to his debtors or bankers. He emerged from his difficulties to do well for himself. His money was primarily invested in real estate. It is a much different situation with trucking or most any type of capital equipment. If you have equipment financed (or anything else) it belongs to the bank until it is paid off. When you finance equipment you have something that depreciates quickly and doesn't accumulate much in retained value. When you have a lot of debt you are a slave to your creditors. You work to support your debt.

[Dejanh]

I don't think most new owner operators need to worry much about paying a lot in taxes the first year. There will be a lot to write off. During the first year or two, I would be more concerned with making money. Avoiding or reducing your tax bite can come later. You can always buy a newer truck later, which could reduce your tax bite with depreciation. It takes a lot of pressure off to not have truck payments. There is some validity to your point about reducing taxes by paying interest. But you are still paying out the same dollars, just to the bank rather than the government. I would encourage those who can pay cash starting out, to do so. There are a number of other ways you can reduce your taxes other than accumulating debt and financing your purchases. You can set up a 401k, IRA, buy real estate, and other investments which offer the tax shelter, but accumulate in value. You will NEVER accumulate wealth by spending money. You accumulate wealth by keeping debt low and making your money work for you. People like Donald Trump have a lot of assets, but not so much net worth due high debt. At one time he was all but bankrupt because of high debt. He was put on an allowance and control of his business was essentially turned over to his debtors or bankers. He emerged from his difficulties to do well for himself. His money was primarily invested in real estate. It is a much different situation with trucking or most any type of capital equipment. If you have equipment financed (or anything else) it belongs to the bank until it is paid off. When you finance equipment you have something that depreciates quickly and doesn't accumulate much in retained value. When you have a lot of debt you are a slave to your creditors. You work to support your debt.

As i appriciate your input on everything trucking related as you know, ill have to respond to your post with another point of view.
You are correct when you say that you run a buisiness by keeping your debt low but i think, as well as you that trucking is not just another buisiness, its much more complicated than the rest as we rely on fuel and its price for example to run it ,which we all know is not something you want to rely on and that only keeps it kind of separated from everything else buisiness related. Fuel can hit 4.00 mark if situation with Iran escalates much further that it already is and what will you do with a 100,000K buisiness investment if you dont have any money in the bank as you paid cash for it.....with payments its someone elses money thats in risk, not my own. I rather pay interest to my bank than to IRS as i am at least getting something in return and building a releasionship with my lender for future investments if situation permits. Donald Trump survived because his money was not in play, even if he went out of the buisiness he would come out VERY wealthy as his money was safely chillin in bank while other people worried about his buisiness outcome and did everything possible to keep HIM afloat. With trucking its the same, if my engine blows up tommorow( god forbidd ) i feel much more secure with the large banking outfit standing in my corner to help me fight the Freightliner than if i was doing that on my own. You dont accumulate wealth by only spending money but to accumulate it you have to spend it, i am still debating on what to do with my truck as part of me dont want any debt at all and ill be able to pay mine off in August or so, but listening to buisinessmen tell me their expiriences i tend to turn my head the other way and lean towards the fact that you should not put your money out there on the risk line, let others people money do that as this buisiness is much more riskier that all buisiness out there, it may cost you some more down the road but, not really much, but the cost is worth it i think....
Friend of mine got killed last month on his tax returns as his truck has been paid off., and he also tells me that he will never pay it off the next time around, i think he is standing correct.

[hawk]

Dejanh, you are so wrong on this one.

If you have the cash, live debt free. If you lack the working capitol, save some more or finance a small portion with the idea of paying back the loan as your top priority.

If your finance charges are $10,000 a year and your income is $100,000, your adjusted income will be $90,000. The difference in taxes you would pay between $100,000-90,000 (without looking at the tax tables) is $2500-3000. I would rather give uncle sam $3000 than the bank $ 10,000. Besides, I would like to use that $7000 wouldn't you?

Its not their money its your money, you signed a note for it. Take the responsibility for it and do a good job!!

Live debt free!!