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At Smarter Loans it is easy to get the truck and trailer financing no matter where in Canada you are located. You can get small and large commercial trucks along with any type of trailer you need with quick and easy financing. Below you’ll find a list of reputable companies that offer truck and trailer loans financing and leasing services in Canada. Click “Apply Now” next to one of these truck loan company listings to complete their application form.
We can help connect you with the top truck and trailer financing providers in Canada.
In Canada, trucking is an essential component of the overall economy, not just for the ~$34 billion in GDP value that it provides, but also for the freight movement of physical goods (consumer products and foodstuffs). In fact, the Canadian Trucking Alliance estimated that over 90% of all goods that have the Canadian consumer as the end user have been shipped solely or partly by truck. With this level of demand for trucking, there are companies all over Canada that provide these services for a fee to Canadian consumers and businesses. These companies either own the trucks as assets on their balance sheets or lease the trucks (meaning that they can use the vehicles, but do not hold ownership rights). It is the choice to own or upgrade the trucking vehicle that spawns the need for a commercial truck loan.
Buying a truck can be an expensive prospect. Depending on the size, make, functionalities and brand, trucks can end up costing $80,000 or more. When a freight transportation business is looking to build or expand its fleet of trucks, they will often approach a financial institution to issue a commercial truck loan that enables them to buy the truck outright and then pay the financial institution back in instalments over the life of the loan. This allows the company to deploy the truck for service, yielding immediate benefits by way of revenues – part of which are used to pay down the debt taken out.
On the other hand, the commercial truck loan can also be used to fund repairs, upgrades and enhancements to the existing trucking vehicle. In some cases, industry operators might find it beneficial and cost-effective to extend the operating life of the truck through embellishments to its engine or other such features. The truck loan can thus be used to fund these expenditures, which are made in a lump sum payment at the time of the completion of the upgrades. Once the lump sum is paid out, the trucking company then pays back the truck loan in instalments over the life of the loan.
The truck loan is a secured loan, meaning that the value of the truck serves as collateral for the loan in case the borrower fails to repay. This is similar to the car/auto loan. However, discounting that similarity, compared to the conventional auto/car loan for personal vehicles, truck loans are significantly different. One of the key differences lies in the rates, which all other things equal, are higher on a truck loan because of the cyclical nature of the industry, making the loan riskier.
To be compensated for this risk, lenders charge higher rates on each truck loan. For this same reason, the risk profile is often out of the parameters for traditional banking institutions who generally tend to be more conservative, meaning that trucking companies (especially smaller ones) have to seek out alternative lenders. In addition to that, unlike a car loan where the borrower is approved for a maximum loan amount and then selects a car based off of that amount, a truck loan requires a borrower to know what truck they would be interested in purchasing before the loan is issued.
Because the truck itself is a tangible asset that has liquidation value, lenders will place a lot of importance on the collateral posted by borrowers. Older trucks will receive a lower valuation due to the depreciation they have already undergone. However, for first time truck buyers, buying a new truck may not be a feasible option. Therefore, it could be worthwhile to explore slightly used trucks.
The purposes that the truck will be used for also play a central role in determining the terms of the loan. Vocational vehicles such as garbage trucks, which are used for a specific purpose within defined geographic areas are likely to receive more favourable terms, while long-haul trucks used for freight transport endure more wear and tear on roads due to the added mileage. For this reason, these trucks are likely to receive either smaller loans or loans with higher rates.
There are generally two types of truck vendors: dealerships and private parties. Lenders generally prefer borrowers to buy from a dealer as there is a greater degree of credibility from a licensed institution, as well as supporting documentation to provide quality assurance.
Strong credit scores indicate a responsible borrower, which is helpful in securing better rates and down payment requirements.
Looking at the operating history of the business allows the lender to assess the financial track record of the company, and whether there are any outstanding debts that remain to be paid before the borrower begins paying back the truck loan.
The higher the cash reserves on the company’s balance sheet, the more secure lenders feel when issuing a truck loan. It is pertinent to note that cash reserves in this scenario are defined as additional cash above and beyond the down payment amount.
The years in business, past balance sheets, income statements, credit references and tax returns are all documents and information that are likely to be assessed before issuing a commercial truck loan. These help the lender evaluate financial strength and stability
Some of the other variables used in loan calculations are the make and model of the truck, the year it was constructed in, the condition it is in if used, and any other major repairs done on the truck in the past. When submitting documentation for the loan, typically, the borrower is also asked to provide pictures of the vehicle in order for the lender to assess its condition. If the truck is not likely to last the duration of the loan term, then securing financing for it becomes significantly more difficult as lenders prefer to have visibility on its cash flows.
If you are interested in learning about the requirements to obtain a truck license in each province, check out this helpful resource from iCanDrive.
Each payment made towards the truck loan is a step towards owning the truck at the end of the loan’s life. This enables the borrower to enjoy the benefits of ownership such as vehicle modifications and/or being able to sell the truck at the end of the loan term. This is in contrast to the leasing option, where the lessee simply pays for the privileges of being able to use the truck during the lease period.
Buying the truck via loan could potentially provide tax benefits as it could potentially qualify for tax savings from depreciation.
When the vehicle is purchased, the loan payments reflect the entire cost of the truck. However, in early years, depending on depreciation policies, the value of the truck on the company’s books could decline at a faster rate than the loan’s principal. This means that borrowers that put up lower down payments end up owning a vehicle that is worth less than what they are paying for it.
Most lending institutions will require a down-payment to be made before the truck loan can be underwritten. For borrowers with financial constraints, this is therefore often not a feasible option to pursue given the quantum of the down payment.
Based on trucking industry statistics released by the government, there are approximately 111.7k establishments that generate an average revenue of $289.6k, implying a total industry size in Canada of $34 billion. The space is also highly fragmented as evidenced by 99.4% of these entities having less than 100 employees i.e. small to mid-sized companies. Lastly, it is worth noting that 81.7% of entities were profitable in 2016. The trucking industry tends to correlate with general economic performance; due to relative outperformance over the last few years, the industry has been one of the benefactors of this economic strength.
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