Shomotion boat owner Mike Scherkenbach four new trucks have been purchased in recent memory through the Rush Enterprises sales network and financed through JX Financial, in partnership with JX Truck Centers and Scherkenbach has a relationship going back to his early truck sales. “I have been in their finance department for 17 years, and the approval can be obtained quickly,” he said.
In recent history, prior to 2022, interest rates across the board were typically at their lowest in history for any type of loan, including truck loan. The reason for that is that the Federal Reserve is keeping the federal funds rate close to zero in the hope of stimulating the economy due to the rapid shock of the COVID-19 pandemic.
Prices have gone up significantly since then. Just ask Scherkenbach, who notes that on the trucks he financed before 2022, after a long history of buying trucks and buying credit, he paid “maybe 4%” interest. Now, prices are “almost doubled” for him.
The doubling of interest rates from 4%-8% is appropriate, since starting from March of 2022 the Federal Reserve began to raise the rate of the federal funds, and in addition on 2022 after that 4.25% is added to the maximum price, increase. the cost of interbank loans. Those prices flow through the commercial market and personal loans unlike the increase in fuel surcharges/prices that eventually fall into the price of consumer goods. (The next meeting at which the Federal Reserve will consider further hikes is scheduled for January 31-February 1.)
What is an additional 4.25% in interest effective during the term of a loan? Consider an example given by ATBS President Todd Amen when asked about the impact of rising mortgage rates on home owners. the businessmen of the service company.
Say an owner-operator with good credit financed $100,000 over five years, usually for multiple loans, before 2022 at 6% interest.
Loan amount: $100,000
Monthly payment: $1,933
Interest paid over time: $15,997
The additional 4.25% interest increases the costs for the same loan, more than 4.25% over the entire term:
Loan amount: $100,000
Monthly payment: $2,137 (or +10.6%)
Interest paid over time: $28,222 (or +76.4%)
At the same time, the objective of the increase in the rate of feed money – to reduce the inflation rate – may have achieved its mark and, at least in part, provided the conditions to obtain other distributions to truck buyers in today’s market. , providing reduced costs. That’s not to say there aren’t many other factors at play, including declining demand and a slowing economy, but Visual markets lost a lot of revenue during the COVID-19 period, and many more. But looking at it from a higher level, it is true that truck prices “have fallen at the same time as interest rates have increased, it seems that it is more than the price to pay back the cost of the interest,” said Amen. “This means that the web site may be a bit different” for many owners.
In the months of October and November last year, according to ACT Research, the average seller of used goods lost 2% and another 3%, respectively – say a loan of $100,000 was signed in September. Wait a few months and it could be close to a $95K loan. At 1.5% interest rate (the amount the fed-fund rate changed in those months) over the month of September, it’s actually more or less a wash — it even if you have $2,000 or more in savings over the life of the high-interest, albeit small, loan. (Owners can play different loan models through various available online loan calculators , such as BankRate.com.)
This is just an example, however, in business loans for owner-operators and small businesses, it depends a lot on individual circumstances. together with the owner, the part of the equipment, the amount of the payment, the time of the loan each month and the business of the owner. himself. For example, when the owner of Shomotion Scherkenbach first started running, “no one wanted to finance me,” he said, talking about a common problem for truck owners. “My first truck, in 2001, I paid 12% financing,” and “it’s gone to nothing” over the years.
Owner-operator responses to recent news Overdrive The polls showed a huge difference in loan interest rates, with loans for new trucks often coming in at lower rates than used equipment. Asked to state the interest rate on used or new car loans written since the spring of this year, results ranged from less than 5% to up to 15%.
There can be real value in shopping between lenders, especially if you have good credit, but as Scherkenbach, Minnesota-based freelancer Kelvin Schmidt’s experience in a recent sale illustrates this well. comparing the value of a close relationship with a long history with a borrower.
He financed his new Volvo, a 2018 VNL 860, at a time when federal interest rates were rising below 2%. This is his second purchase financed from the same seller, with the same lender, and his loan interest rate is 9%-10%. , he said.
He is driving a new model 2023 as we speak, however, even with the increase in interest rates last year, compared to that time, he got a better price on the current rate, at 6%. It came as a result of his negotiation, talking about the solid nature of his previous loan repayments, his credit history, and his commitment to the borrower from almost ten years ago. “I have been a client for nine years, never missed a payment, never been late, and never called with excuses,” said Schmidt.
Finally, he got the deal he wanted, regardless of the expansion of interest rates. —Matt Cole contributed to this report.
(Target: Cargo situation: Analysts’ forecasts are negative on the size of the 2023 mine)