How Buying a Used Semitruck Saves You Money

If you’re starting out as an owner-operator truck driver, the truck you purchase is one of your first and most important decisions. While a new truck may be appealing, a used semitruck will be more affordable — and the savings it provides will help you as you get started. Here are the various ways that buying a used truck will save you money.

Lower the Initial Purchase Price

Most obviously, you won’t have to spend nearly as much on a used truck as you would on a new one. New semitrucks often range between $80,000 and $150,000, and they can reach $200,000 or more if they have a lot of upgrades and custom features on board. Used trucks similarly vary in price, but they often can be a fraction of the cost of new trucks.

Regardless of whether you purchase your truck outright or finance it, if you pay less at the time of purchase, you can reap multiple benefits.

You’ll be able to get into your own rig sooner since you don’t have to save up as much, and your risk exposure will be less because you have a smaller amount invested in the rig. This lower risk exposure makes it easier to pivot if your initial intended business plan needs to be revised, which is better done sooner rather than later if you’re self-employed.

Reduce Interest Payments

Assuming you do finance your semitruck, you’ll end up paying much less in interest if you purchase a lower-priced used one. Even if the interest rates on a new truck loan and a used truck loan are identical, the smaller balance on the used loan will result in substantially reduced interest. Over the course of a loan’s duration, the total savings can amount to quite a lot.

As an example, consider a new truck loan for $150,000 and a used truck loan for $80,000. Also, assume both loans had an annualized percentage rate (APR) of just 5 percent. In just the first year, the new loan will result in interest payments of $7,5000 and the used loan will have interest payments of $4,000. That’s a $3,5000 difference in only one year.

The difference in total interest paid becomes even more pronounced over the multiple years that a loan lasts, and it’s much more if the interest rate is higher. As of August 20109, some semitruck loans had APRs as high as 30 percent — which would more than quintuple the example’s first-year savings.

Whatever you ultimately save by financing a used truck instead of a new one is money in your pocket. Interest is money that you pay and never see a return on, so you should always minimize it when you can.

Eliminate Federal Excise Tax

The decision to buy a used semitruck also eliminates the need to pay federal excise tax (FET) on the purchase. FET is a 12-percent federal tax on the initial sale of heavy commercial vehicles. Since the tax is only on the initial sale, it doesn’t have to be paid on the sale of any used commercial vehicles.

Although this doesn’t provide the long-term savings that reduced interest payments do, the elimination of FET is helpful. You’ll likely save thousands of dollars since trucks cost tens or hundreds of thousands, and this savings comes when you need it most. Anyone who’s starting a business could use an extra few thousand dollars as they get ready to begin operations.

Minimize Physical Damage Insurance Premiums

Since a used truck is inherently worth less than a new one, physical damage insurance premiums tend to be lower for used ones.

Physical damage insurance is the portion of a commercial truck insurance policy that covers the truck itself against damage in collisions and other incidents, and premiums for the protection are directly linked to a truck’s value. When a truck costs less, insurers can charge less for the protection because their potential payout if the truck is totaled won’t be as much.

How much you stand to save on these premiums depends on your truck’s value, chosen limit and deductible, and many other factors.

You will save money each time you pay your truck insurance bill, though, and that will ease your cash flow. In an industry where owner-operators sometimes struggle to collect payments and need to cover expenses, even a slight cash flow benefit can have a big impact on month-to-month finances.

Save on Depreciation Costs

Finally, you’ll save on depreciation as you use your semitruck if you drive a used one with miles already on it. The truck will depreciate at a slower rate than a new one will, and it won’t depreciate as much in total value since it’s worth less to start with.

Minimized depreciation costs won’t help you on a weekly or monthly basis, but you will appreciate the savings whenever you decide to sell the rig.

If you want a used truck, search the used truck inventory at Arrow Truck Sales.