First, there are the captive finance companies. Think of them as the financing arms of all the major manufacturers. They exist solely to provide financing to the public to sell their trucks. In the past, they have been somewhat liberal in their underwriting criteria and, like the mortgage industry, perhaps too liberal. This relaxed underwriting of the past has caused serious defaults today. This has resulted in a subsequent tightening of credit. The result is the selling of fewer trucks and trailers; customers have a harder time getting financing. Nonetheless, the captive financing company will always be part of the freight bill factoring providers that can help expedite payment so you can make payments on time.
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The third financing arm for commercial truck financing is the in-house financing program. Usually offered by the smaller vendor, in-house financing offers benefits for both dealer and customer. By offering to finance in-house, the dealer can move more inventory than if he didn’t. This is important because a smaller dealer doesn’t always have a captive finance program.
And with credit tightening up the independent financing companies are becoming less important. The dealer can act as an independent financing company by offering all the same products while keeping the benefits of earning interest on the trucks they sell. Of course, the bad side is they also suffer in the case of defaults where the customer stops making payments. The customer’s benefits are they have a one-stop-shop where they can finance a truck at the same place they are purchasing it from. The downside is they are limited to their inventory.
