“Is this the right time to finance my next piece of equipment?”
The fed funds interest rate and prime rate fell to a new low toward the end of 2019 and has remained steady in the first quarter of 2020.
Which means that if there was ever a good time to consider financing your next piece of equipment to grow your fleet, NOW is that time.
And this week, the coronavirus spread outside of China sending shockwaves of fear throughout the world, causing a dip in the stock market and mortgage rates.
With lower rates, investors suffer but borrowers win. That’s why you should be asking yourself, “Is this the right time to finance my next piece of equipment?”
Analyze Profitability of Your Equipment Before Committing
So we know that money is cheaper to borrow but you still have a little more work to do to determine whether or not to make a certain equipment purchase.
On top of wondering whether or not a certain piece of equipment is right for you, it’s also important to take the inner workings of the deal into consideration.
You and I know that the freight business comes down to doing one all important thing – making money!
That’s why projecting your expected sales and profits on the equipment is so crucial. Still, when it comes to using simple calculations to determine your best truck loan terms and strategy, most people fall short.
That’s why CFF built the Budget Builder Tool
It does more than just calculate your projected fuel costs, which are an important factor, it helps you build a more realistic view of your profit margins with all key factors taken into account.
What’s more, it helps you determine the best truck loan repayment strategy for you.
That’s thinking like a BOSS and doing the financials to determine your best approach for purchasing your next piece of equipment in this low interest rate environment.
A Closer Look At Budget Builder
Let’s take a closer look at how to use the Budget Builder tool to accurately calculate projected profitability of your commercial truck or equipment.
Monthly Revenues of Equipment – You would start by estimating your monthly revenues on jobs you get. Let’s assume that you make $20,000.
Watch the Budget Builder Video
Payment – The next thing you should plug in is your monthly payment. If you buy a tow truck for $75,000 and get a 60 month used truck loan, then your payment will be somewhere around $1,600 a month.
Monthly Labor Costs – If you have a driver expected to operate the vehicle for you, then you should enter your estimated labor cost in the next field. Let’s say this amount is $5,000 a month.
Monthly Fuel Costs – We all know this is a sizable expense that has to be considered with the purchase of commercial trucks, so let’s say that’s around $2,000 a month. Enter this number into the appropriate field.
Monthly Insurance Costs – This is a cost that’s jumped significantly with new policy changes. So let’s say this is about $800 a month.
Miscellaneous Costs – This is an often overlooked expense, but let’s be realistic and add $1,000 a month here.
Now that you’ve got all your numbers entered in each field of the Budget Builder, click “Calculate” and watch the tool reveal your potential monthly profit number!
You should come up with a profit of $9600, in this example.
What’s even cooler, is you can play with the numbers and calculate what happens if you put a bigger down payment vs a smaller one, and what happens if you pay the equipment off in 48 months vs 60 months.
That’s thinking like a BOSS and doing the financials to determine your best approach for purchasing your next piece of equipment in this low interest rate environment.
President of CFF, Matt Manero, gives advice on buying new equipment during times of low interest rates.
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About Commercial Fleet Financing, Inc.: At Commercial Fleet Financing (CFF), our pros have given smart advice to fleet owners and owner-operators in the transportation, moving, towing or construction industries for more than two decades. With CFF, finding the right financing solutions is a phone call away and most borrowers secure commercial vehicle financing with ease. To talk directly with one of our finance pros and get started with a credit approval in as little as two hours.
CFF’s phone number is (469) 281-2962.
