Cash or loan for truck?
 

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 :D 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.

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.

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

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!

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

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.

"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. :lol:

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

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.

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?

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.

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.

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!!!

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.

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'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.

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.

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!!

Dejanh

I have read and agreed with many of your post on here. I feel you know what your talking about and respect you opinions. I do appreicate you taking the time and posting to help those like my self who are looking into going O/O and getting back into Trucking like myself.

But this time I do not agree nor can I disagree 100% for I will have to get a loan to get started, but I have had a Very Wiseman tell me one day.

He Said "Son, Let me tell you what. If you go into Business, Avoid at all cost having to get a Loan. For once you get that Loan, you are no longer the Owner of that Business, the Bank is. Till you get it paid off, they can come and take it away."

This Wiseman is A friend of my Father, and now a friend of mine. He runs his own business, and a Farm. He is now also a Politican you may say, a County Commissioner.

I did tease him when he was running, I asked him was he going to get a White Suit and a White Catie and become Boss Albertson as in Boss Hogg?

Well me personally I don't like using my own money but I manage to get other people's money for free (banks or credit card companies, I don't mean people) but I would like to offer one comment though it may smack of ignorance as I'm new to the trucking industry and it's been commented that the trucking industry is different from others.

I have noticed that companies like Heartland and I believe Crete are debt free so I assume to say that trucking is different and you should carry debt I don't think holds water. Again this may be an ignorant observation and if so, please excuse my ignorance.

Crete, Heartland and Werner are i think only trucking companies that are debt free but they are small outfits in comperison with Schneider or JB Hunt which all carry debt including all other trucking firms.
I made about 107,000 last year including 6 months of being a company driver and about 4 months as a O/Op since i took off before purchasing my rig and got a refund check of 1100 from my federal, 920 i payed to my state, i did pay 2 quaters totaling 3500$ last year but i think i did very well since i pay my taxes at the end of the year, because even my company didnt withold anything when i drove for them. My truck kept this tax bill low and this goes to prove my point about having a payment. Every single buisiness out there deals with banks and i dont care how big they are, our government is the biggest debtor to the third world countries because they use other people money to finance their goals including this war, which is financed through deficit spending and they will have to pay interest on it....

Trucking is much more riskier than all other buisinesses out there, you got fuel, breakdowns, slowdowns like the one we are expiriencing at the momment and i feel much more confident in my well being if i have 100,000 stacked up in the bank somewhere than not, and have my investment sit there collecting dust....

Well not to interject myself too far into this discussion Dejanh, but I don't think anyone is saying to use ALL of your cash. Yes it is smart that you have money set aside but even GMAN, and if I'm wrong please correct me, who advocates buying a truck for cash, always says to make sure you have emergency cash on hand.

Like I said, I prefer to use other people's money too, though like I said, I like to get it for free, so I do lose the tax benefit that you get of making payments.

Why not use the interest from the money in the bank to make the payments.

If you're truck rich and cash poor you won't be able to buy that 379 or 900 for .50 cents on the dollar when some O/O goes broke.

Another thing to consider is if your truck gets wrecked and the insurance is jerking you around you have the bank to step in and protect their collateral.

Here’s a way to rephrase the question….suppose you have $100K and you want to become an O/O or Carrier. Is it better to borrow and keep your money in the bank earning interest or use it better to pay cash for your equipment and then operate debt free? What are the pros and cons? Let’s assume you have additional funds set aside to get the business up and running (2-4 months operating expenses). Let’s also assume you are buying $100K worth of equipment (1-2 yr old tractor).

I can see benefits to both….

Debt free:
1) You owe nothing so there is no monthly payment needed so if your miles are low due to the economy or health then you can weather that storm easily.
2) You are writing off 100% of the cost of the equipment over a (approx) 5 yr period which lowers your taxable income greatly.
3) You are keeping the money you would have paid for the banks/leasors to make their profits (interest/lease charges). Your yearly income is that much higher.

Finance (bank or capital leasing company):
1) You keep your $100K invested and earning 6%-10%. That will help offset the finance charges you are paying the bank/leasor.
2) You get the tax advantage of lowering taxable income by the amount of the lease or loan payment.
3) You have the money in the bank to cover any stretches of low miles.

I can see benefits to both….

What skews this view is that financing or leasing allows people to get in that don’t have the cash available and so they end up leveraging themselves to the hilt. That might work when economic times are good but can be devastating if your health or the economy turns against you.

For those people, to avoid going into debt up to your neck, another way that Gman advocates is buying an inexpensive truck and being proactive on the maintenance. The risk is that even with a detailed analysis at time of purchase, you will be rolling the dice on breakdowns and the money/loss of income that might happen. Sure the engine/tranny might last but all that nickel and dime stuff can fail will drop your mileage (seals, shocks, kingpins, etc) and you lose income while you stop to repair. But if you end up with a well maintained tho older truck, you can get in safely that way.

The best financial model for an O/O, gleaned from members on this board and financial advisors, is to save your money until you can pay cash for the truck and 3-6 months operating expenses (minus fuel). Then make payments to an interest bearing account for your next truck. In addtion, you should set aside .07 a mile for maintenance on the current truck. There is no better plan than this one unless someone gives you something for free and that never happens to me. :D

When you look at the financial health of a company, from an investment perspective, one of the first things you look at is the cash reserves and debt ratio. You want high cash reserves and a low debit ratio. A company with zero debit is in the best financial health a company can be in.

As for using someone else's money, I don't know how to do this. The debit from loans and credit cards belongs to me. The risk is the same unless you plan to shelter yourself with banrupsey. That won't work unless you hide your assests and you will get in big trouble for that (bankrupsey denied). You could form a corporation to protect your personal assets and get a coporate loan. Thats not going to happen unless the corporation has enough CASH. Also, first time buyers for trucks face interest rates in the double digits.

CASH, CASH, CASH ... Live debt free!! :wink:

We would all be better off living debt free. I am not suggesting that anyone put ALL of their available cash into a piece of equipment. Keeping debt low or getting rid of debt will put you in a much better financial position than having a high debt ratio. There are a lot of people in this country who live well beyond their means. They have all of the trappings but no cash. They are one paycheck away from losing everything. I can only share what has worked for me and what I have seen others do. To give you an example, I have a friend of mine who used to run his own authority with about 30 trucks. He had a lot of debt. Several years ago he decided to sell all of his trucks except 2 and now is virtually debt free. The trucks he now owns he drives himself. They are older but he just keeps repairing them as needed. He doesn't have the pressure of making big equipment payments. He doesn't owe anything on his equipment. He doesn't work as much because of taxes, but has a true net of about the same as if he had a lot of debt to service. He works when he want to and take time off as he wishes. With high debt, he could not afford to do that. The only way you can service high debt in this business is to run. High debt means that you will need to run hard, just to keep up. If you have health problems yourself or a family member, then you may not be able to work as hard. That means less income and the payments will remain the same whether you work or not. If your only reason for having debt is taxes, I suggest finding a good tax professional to help you shelter your income. When you pay cash you still have the tax deduction for the equipment, you just don't have the expense of debt service or interest. There was a time when I felt that unless I owed $1 million that I wasn't successful. True success is not having any debt. True success is not owing anyone. That doesn't mean that you never borrow money. There are times when you may need to borrow. If you have assets which are not tied up, you have something to secure a loan which could earn you a lower interest rate. If you don't have enough for a good cash reserve and don't want to wait until you can afford to pay cash for your truck, then you may need to finance all or part of your purchase. I don't recommend putting all of your available cash into equipment. You need to have a reserve for emergencies. Trucks will break down. It isn't whether they will break down, only when. It doesn't matter if the truck is used or new. They will break down.

I dont work as hard as one would think with a 1500 truck payment each month and 320 in insurance. If i combined all of my time on the road from the time when i signed on to now, i think i did about 8 months (or less but not more) worth of work OTR while i was home the rest, i managed to save 50K(including the money i am waiting for). I came home Thursday and will be sitting for at least a month.
It doesnt have to be all work, i said it before and ill do it yet again, it aint about how much money you make, its about how you manage what you MADE..

AMEN, or when you get to be my age its more like this ... "it ain't about how much money you make, it's about how much money you SAVE"

it ain't about how much money you make, it's about how much money you SAVE

That works too.. :wink:

Hey, Statistical data from Sri Lanka show very different demographics regarding the consumers in the payday loan market. Each country will likely have a slightly different profile based on social, cultural, and financial regional differences. An example is Oncredit.lk

A lot of people ask me what is a remonttilainaa? So this is a renovation loan. If you moved into a new house or you live there and you want to renovate or to change something, but you don`t have enough money or at all, you can loan from a company or a person. This type of thing is done by a lot of people who are in your case. I found out about one website remonttilainaa.com, here you can borrow exactly from the website, and the rates and people you are working with are amazing. I recommend you to do the same if you want to renovate, but you don`t have money.

I've always believed that saving money is an important step into becoming financially independent. Having savings to depend on is a must, especially in today's world, when you don't know what can happen the next day. Sadly, I learned this the hard way. I had an emergency medical situation that I needed to treat quickly if I wanted to survive. I needed money but I didn't have enough savings so I had to get a personal law. Thankfully, I found the company https://www.vakuudetonlaina.com/4000...man-vakuuksia/ which I loaned money from with low interest, but that experience taught me the importance of always saving money.

I've been a truck driver for the past five years, and I must say that it hasn't been an easy road. In the beginning, I was working at a truck company that didn't pay me very well, no matter how hard or for how long I worked. That's when I decided to get my truck, which has been the best decision I have ever made. Even though I didn't have all the necessary money for it initially, I took a loan that I paid later. I don't regret that decision at all since it terrifically changed my life. I was lucky to get a loan from an excellent company called https://hurtigudbetaling.dk/ , which offered great deals.

I agree. I also believe that saving money is a key step towards financial freedom. A year ago, I was in debt and constantly borrowed money from various organizations. Fortunately, I was able to deal with these problems. I started saving 10% of my earnings 4 months ago. Now I have a small amount of savings, but I'm not going to stop there.