Shomotion fleet owner Mike Scherkenbach has bought four new trucks in recent memory through the Rush Enterprises dealer network with financing through JX Financial, affiliated with JX Truck Centers and with whom Scherkenbach has a relationship going back to his early days buying trucks. "I've been with their financing department for 17 years, and can get approval pretty much instantly," he said.
In recent history, prior to 2022, interest rates all around were generally at their lowest levels in history for all manner of loans, including truck loans. The reason for that is the Federal Reserve had kept its target federal funds rate near zero in hopes of stimulating the economy in the wake of the early shock of the COVID-19 pandemic.
Rates have gone up considerably since. Just ask Scherkenbach, who notes on trucks he financed prior to 2022, after a long history buying trucks and building creditworthiness, he was paying "maybe 4%" interest. Now, rates are "up nearly double" that for him.
A doubling of interest rates from 4%-8% makes sense, given that starting in March of 2022 the Federal Reserve began raising its federal funds target rate, and cumulatively over 2022 subsequent hikes have added 4.25% to the target rate's upper limit, boosting the cost for interbank lending. Those costs flow into commercial and personal loan markets not unlike rising fuel surcharges/costs ultimately hit the price of consumer goods. (The next meeting at which the Federal Reserve will consider further hikes is set for January 31-February 1; Specialty equipment financier Commercial Fleet Financing President Matt Manero noted the Fed has signaled further rate hikes of as much as another three-quarters of a percent are on tap for 2023, with no reversal likely.)
What's a potential extra 4.25% in interest worth over the course of a loan term? Consider a hypothetical posed by ATBS President Todd Amen when queried about the impact of rising borrowing costs for owners among the business services firm's clientele.
Say an owner-operator with relatively good credit financed $100,000 on a five-year term, common enough for many truck loans, in pre-2022 times at 6% interest.
