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View Full Version : So what's the difference from paying cash or taking payments for a new truck?


grandview (2006)
06-28-2009, 08:49 PM
A lot of guys here say they won't take payments on a new truck and will only pay cash. So my question is what is the difference from saving up to pay for one or just make monthly payments?

Ex. For us not so rich guys. Say a new truck payment is 500.00 a month for 48 months. This gives you a truck right away. Or do you put 500.00 a month away for 48 months to pay cash for it?

This for a new truck only not used.

JDiepstra
06-28-2009, 08:51 PM
Usually when you finance a truck you have to pay interest. So, a $30,000 truck actually costs you $38,000.

Numbers are just an estimate of course.

Petr51488
06-28-2009, 11:55 PM
only people who are scared pay with cash. they can't manage their money. Paying by credit not only builds your credit, but it allows you to invest in other equipment. If i paid everything i own with cash, i would not be at the point of my business today. Being that everything is paid off, the new purchases paid for themselves by allowing me to get more work, and work more efficiently. efficiency = money

doug1980
06-29-2009, 12:09 AM
I think the main thin to consider is those that are just starting out. For instance, me. I have 10 customers and would love to get a trailer, ZTR, new WB and a new work truck. Now if I was to go out and finance all that right NOW I would be in a huge mess. So for me the best option is to slowly add equipment as I can and not finance. But for those that are well established and are making goo money why not finance. Like was said earlier it builds credit. There are pro's and con's with both. If I was rich I would just pay cash to avoid the interest (wasted money) but since I am not rich I financed my 2007 truck $32,000 and my 2007 Jeep $20,000 and my house $45,000. Thank god we have 4 incomes to pay for all my stuff. lol

LouisianaLawnboy
06-29-2009, 12:10 AM
only people who are scared pay with cash. they can't manage their money. Paying by credit not only builds your credit, but it allows you to invest in other equipment. If i paid everything i own with cash, i would not be at the point of my business today. Being that everything is paid off, the new purchases paid for themselves by allowing me to get more work, and work more efficiently. efficiency = money

Stupid advice. Read a book titled the total money makeover by dave ramsey.
Posted via Mobile Device

Stillwater
06-29-2009, 02:56 AM
only people who are scared pay with cash. they can't manage their money. Paying by credit not only builds your credit, but it allows you to invest in other equipment. If i paid everything i own with cash, i would not be at the point of my business today. Being that everything is paid off, the new purchases paid for themselves by allowing me to get more work, and work more efficiently. efficiency = money


Yep I see these guys every year but never the next......

Stillwater
06-29-2009, 03:24 AM
A lot of guys here say they won't take payments on a new truck and will only pay cash. So my question is what is the difference from saving up to pay for one or just make monthly payments?

Ex. For us not so rich guys. Say a new truck payment is 500.00 a month for 48 months. This gives you a truck right away. Or do you put 500.00 a month away for 48 months to pay cash for it?

This for a new truck only not used.

Due to the 1/2 truths I suggest ignoring post 3 and think about this....

the difference is different for different people, it depends upon the current status of your business. do you have at least 1 year in operating expenses in a emergency fund?, do you have a LLC? if you employ anyone full or part time do you have at minimum 8 months of payroll? do you currently have any existing debt? are you pulling business credit or personal credit? because the credit scoring is totally different between the two. Ask yourself this question what percentage of your 500.00 dollar truck payment is representative of your monthly income? Are you buying it or is the business buying it. The differences are huge. Their is a bottom line hear. If you are making a profit and managing you resources wisely, and you can afford the monthly payment your savings or checking accounts, cd's or other business investments will reflect that right now this very moment by showing decent balances. The hard part is being honest with yourself if you have right now very little saved and current resources are marginal then it is doubtful you can support the 500per month.

fool32696
06-29-2009, 03:47 AM
well said stillwater

Petr51488
06-29-2009, 09:58 AM
Due to the 1/2 truths I suggest ignoring post 3 and think about this....

the difference is different for different people, it depends upon the current status of your business. do you have at least 1 year in operating expenses in a emergency fund?, do you have a LLC? if you employ anyone full or part time do you have at minimum 8 months of payroll? do you currently have any existing debt? are you pulling business credit or personal credit? because the credit scoring is totally different between the two. Ask yourself this question what percentage of your 500.00 dollar truck payment is representative of your monthly income? Are you buying it or is the business buying it. The differences are huge. Their is a bottom line hear. If you are making a profit and managing you resources wisely, and you can afford the monthly payment your savings or checking accounts, cd's or other business investments will reflect that right now this very moment by showing decent balances. The hard part is being honest with yourself if you have right now very little saved and current resources are marginal then it is doubtful you can support the 500per month.

You're right. I didn't think about the guy whose starting up. At that point YES, pay cash because theres no sense in buying thousands of dollars of brand new trucks and equipment when you don't have the work to back it up. I didnt even think that route. But i'm still sticking to what i said before. Once your business IS established and have a good customer base and know your monthly expenses, credit is the way to go when you want to go larger.

Stillwater
06-29-2009, 10:11 AM
You're right. I didn't think about the guy whose starting up. At that point YES, pay cash because theres no sense in buying thousands of dollars of brand new trucks and equipment when you don't have the work to back it up. I didnt even think that route. But i'm still sticking to what i said before. Once your business IS established and have a good customer base and know your monthly expenses, credit is the way to go when you want to go larger.

I agree with that........

Petr51488
06-29-2009, 12:35 PM
I agree with that........

thanks... i was just thinking where i was at, at that point, and not of the guy whose just starting out.

Stillwater
06-30-2009, 12:28 AM
thanks... i was just thinking where i was at, at that point, and not of the guy whose just starting out.

Hey petr....
are you anywhere near a town called Westfield? I lived their at one time.....

Petr51488
06-30-2009, 02:19 PM
Hey petr....
are you anywhere near a town called Westfield? I lived their at one time.....

Kinda, i'm about 30 minutes from there.

mdlwn1
06-30-2009, 04:32 PM
only people who are scared pay with cash. they can't manage their money. Paying by credit not only builds your credit, but it allows you to invest in other equipment. If i paid everything i own with cash, i would not be at the point of my business today. Being that everything is paid off, the new purchases paid for themselves by allowing me to get more work, and work more efficiently. efficiency = money

THIS!

As I'm reading this..Im thinkin some southerner is gonna say how wrong you are.....Lo and behold. Any one with half a brain cell can realize (if they try) that if a truck payment is say 500/month...and it enables you to generate lets just say a minimum of 5k per month.....only a complete fool would pass this opportunity up. It's called growth.

mdlwn1
06-30-2009, 04:42 PM
Its about deployment of capital. Lets say you only have 20k. You need a truck, a new mower..yadayadayada.....Financing makes this easy. As long as you know how to take home more than you spend....its the very foundation of modern capitalism. Having said that...probably 75% + of all americans do not understand this and are now underwater.

SunState Lawn Care inc
06-30-2009, 07:43 PM
Buy used instead of new you will save in the long run, if you have to finance it and need it to make money then get it. Not everyone can pay cash for a truck if you can save a couple of more months and make due with what you have until you save enough then save and pay cash. Try and stay as debt free as you can and still get the job you want/need done. I'm no financial advisor and don't pretend to be just speaking from past mistakes and experiences.

If your making plenty of money and just want the new truck then let your heart be your guide but think hard about it for a week or so before diving of into a big truck payment remember it will be used an hour after leaving the lot and not worth near what you owe on it.

pclawncare
07-01-2009, 12:36 AM
Ok here is a break down for everyone from my figures. I dont think that they are wrong but if anyone has any comments or corrections please. Ok assuming you buy a $30,000 Truck brand new assuming a 60 month loan at 5.9%. From what i could find from a quick search a new vehicle depriciation up to 20% the first year that sounded a little high to me so I used 16% for the 1st 13% 2nd 10% 3rd year assuming you only own it 3 years. Total depriciation would = $11,700 Bringing the $30,000 vehicle to a current value assuming normal mileage to $18,300. You would have paid out a total of $20,829.24 at 36mo and have a principal due of 13067.93 + future intrest. If you sold the vehicle at this point you would have 5232.07 Left after pay off. Subtract that out of the total paid and the cost of driving that vehicle is $15,597.17 or $5,199 per year and you have no truck because you sold it. If you bought a 3 yr old $10,000 truck for cash assuming that the truck keep depriciating at 10% per year the total depriciation would be $2,700. So the truck is worth $7,300 or a cost of $900 per year. Given some additional maintenance fees and so on just a break down of cost. Hope it some what made sence

topsites
07-02-2009, 10:10 AM
Something more than a few folks seem to miss on terms of cost...
The insurance is cheaper on a truck that's paid for when full coverage is not required,
you can carry any coverage you want and you do not have to have full coverage so long
it is all yours, for instance one can carry minimum liability only and that's a whole lot cheaper.

The credit rating, too...
It doesn't take much, these places like Equifax and TransUnion and Experian, all it takes is for some reason
one or more of them decide that you owe a little more than you should and you can lose 50-100 points...
Once that happens the Insurance company can jack your rates, too.

Another thing that stands out is I don't own something that is bought on a loan, the bank does.
So if all hell breaks loose, if for instance the business were to fail (for any reason)?
At least the truck is mine, all mine, might not fix my problem but it's one less thing to worry about.

only people who are scared pay with cash. they can't manage their money.

I think you may have got this backwards.

topsites
07-02-2009, 10:30 AM
THIS!

As I'm reading this..Im thinkin some southerner is gonna say how wrong you are.....Lo and behold. Any one with half a brain cell can realize (if they try) that if a truck payment is say 500/month...and it enables you to generate lets just say a minimum of 5k per month.....only a complete fool would pass this opportunity up. It's called growth.

Yeah and what if your phone doesn't ring, what happens then is you put yourself
in a dire predicament where you will HAVE to lowball just to get the work,
then likely you will also have to work for some real PITA customers just because if you
don't the bank will repo your only vehicle, now the reason us southerners know
a little of something is why we say, don't make yourself a slave.

PROCUT1
07-02-2009, 02:12 PM
I do the cash thing.

When work slows down so do my bills.

Right now we have had record rainfall this month. I am weeks behind on completing work (sealcoating)

I have had next to no income this month because we have been working only on 2 big jobs that wont pay for 60 day after completion and theyre not done yet. They were supposed to be done weeks ago.

Having a dozen trucks, if I had to make payments on them, I would be tight.

They can sit in the yard on a rainy day, rainy week, month without work, and dont cost me anything but insurance.

I like that peace of mind.

mdlwn1
07-02-2009, 04:52 PM
Yeah and what if your phone doesn't ring, what happens then is you put yourself
in a dire predicament where you will HAVE to lowball just to get the work,
then likely you will also have to work for some real PITA customers just because if you
don't the bank will repo your only vehicle, now the reason us southerners know
a little of something is why we say, don't make yourself a slave.

It's ok to be a pesimist....but your over simplifying the discussion. Only a dum dum would buy new equipment and not have a good idea whether or not the phone will ring.

PROCUT1
07-02-2009, 05:09 PM
It's ok to be a pesimist.

pessimist or realist?

Most people dont have a huge bank account.

I plan for rain.

But i didnt plan that it would rain EVERYDAY for the last 6 weeks.

In my business (sealcoating) a little rain, or a threat of rain causes a huge delay unlike mowing.

Im running at about 40% or less productivity which is translating into a fraction of the billable work that I have budgeted to be completed.

There is no end in sight for this forecast either.

If I had payments on my trucks and equipment......Yes i could make it during a slowdown. But you translate that slowdown to weeks, or months and now Im in trouble.

I never thought it could happen.....Not this much for this long...

Those payments stay the same every month no matter what your income is.

A few thousand a month for payments is no big deal if Im running 90-100%.

But If I had payments on my trucks right now, they would be sitting in the banks lot.

You can only plan so much.

You can plan on grass and income slowing down in july/august with lack of rain.

What happens when it slows down in the beginning of june and never picks back up?

You base your payment ablity on your expected income.

Cut that income by 75% and see if you can still swing it.

If you can....Go for it.

Financing makes sense to me in very few cases.

If I have $5000 to buy a machine and a bank wants to give me a rediculously low interest rate to finance it.....Well, Ill do it then.

SHORT TERM FINANCING FOR A NEED.

If I get a contract that a machine would be a big help on. If I cant afford it but I have SHORT TERM work that will PAY IT OFF. Ill take the chance and do it.

Too many people finance based on plans or dreams and it doesnt work out that way.

They think that ZTR will get them more lawns.
They think since they are mowing with a walkbehind 40 hours a week, if they had a ZTR they would cut that time in half and do double the lawns.

Well....More often than not.....They cut the time, but dont end up with double the lawns...

They see they make $10,000 a month mowing with their older truck.

Whats a $700 a month payment for a new shiny one? Just a fraction of what I make. Peanuts....I can swing that....

But somehow what your plans are, and what you figure out on paper, when that becomes reality....its not the same...

You buy that truck.

Mower breaks...Need a new one....Finance that too
An enclosed trailer would be a big help.....Just a couple hundred a month

Then the drought arrives
The lowballers come in and take a bunch of accounts
That commercial contract you have had LOYAL for 5 years goes with someone else
The economy tanks and you have trouble collecting.

The best plans seem to have a way to turn out different.

If you have the self discipline, a good amount of money in the bank, low overhead, low expenses, and what you want to buy will DIRECTLY MAKE THE PAYMENT AND ADD MONEY TO THE BOTTOM LINE. Then it makes sense.

Only you know your numbers and if its right.