Truck Money Got Expensive And Your Insurance Is Part Of The Deal
FreightWaves reported on September 13 that banks left freight lending during the downturn. Equipment money now runs from 5.25 percent to over 12 percent depending on your credit, and that changes what your policy has to do.
Banks walked away from truck lending and the money got expensive
FreightWaves reported on September 13 that banks exited freight lending during the downturn and have not come back, which leaves mid size fleets hunting equipment money through dealer relationships instead of their own bank. In that piece Thomas Wasson quoted Kirk Mann, EVP and general manager of transportation vendor solutions at Mitsubishi HC Capital America, who said his company has not moved its underwriting philosophy but that "the credit profile of the customer definitely changes during these down cycles."
The rates in that report tell you where you sit. An investment grade private fleet is financing around 5.25 percent. A lower credit small operator is quoted 12 percent or higher and is usually asked for a deposit on top of it. Same truck, roughly double the cost of money, and the difference comes straight out of the margin on every load you run.
Your lender writes part of your insurance policy
Here is the part a lot of owner operators only find out at signing. A financed or leased truck is not just your asset, it is the lender's collateral, and the loan agreement dictates what coverage has to sit on it. That normally means physical damage coverage at a value the lender approves, the lender named as loss payee, a ceiling on how high your deductible can go, and a requirement that they get notice before the policy cancels or changes.
Let that coverage lapse and the lender does not call to remind you. They force place their own policy, bill you for it, and that policy protects the truck for their benefit and not yours. It routinely costs several times what you were paying and it does nothing for your liability. With 12 percent money and a deposit already out of pocket, a force placed premium is how a working truck becomes a repossession.
What you owe and what the truck is worth are two different numbers
The used market is why this matters this month. FreightWaves put four year old sleeper tractors at roughly 30,000 to 50,000 dollars across the 2011 to 2021 stretch, then at about 118,000 dollars at the early 2022 peak, a 136 percent jump over pre pandemic highs. Average retail now sits at 60,986 dollars.
If you bought near that peak on a five or six year note, your balance can still be higher than the truck is worth today. Physical damage pays actual cash value or the stated value on your schedule, never the payoff. Total the truck and the check goes to the lender first, and whatever it does not cover is still your debt on a truck you no longer have. Ask about gap coverage before that gap is a real number, and revisit your stated values at every renewal instead of letting an old figure ride.
Expensive money means older trucks stay in the fleet
When financing is hard to get, the sane response is to run what you already own for longer. That is a fair business call and it comes with a maintenance bill. Older equipment throws more brake, tire and lighting violations at roadside, and those land in the Vehicle Maintenance BASIC that an underwriter pulls before quoting you. A carrier running eight year old trucks with a clean inspection record prices better than one running four year old trucks with a pattern of maintenance hits, which is a big part of why what two similar fleets pay for truck insurance can look nothing alike.
Trucking Info reported this year on new equipment financing programs built for exactly this problem, and noted that high equipment costs, thin margins, stricter lending requirements and higher insurance premiums are all pressing at the same time. Those four are connected. The maintenance you defer shows up in your inspection record, and your inspection record shows up in your renewal.
New authorities are carrying the worst of it
One number in the FreightWaves report should stop anyone thinking about hanging their own authority this year. Eighty five percent of motor carriers with less than two years of operating authority failed during the downturn. Freight cycles normally run twelve to eighteen months. This one ran about three and a half years, and the damage compounded the whole way through.
If you are going anyway, go in with the filings and the limits right the first time, because a lapse in year one is what ends most of them. Our guide to insurance requirements for a new trucking authority walks through what has to be on file before you can legally book a load.
Get a truck insurance quote that matches what you actually owe
If you have refinanced, bought used, or stretched a note to keep a truck on the road this year, the numbers on your policy are probably out of date. Get a truck insurance quote in under a minute and we will check your stated values, your deductible against what your lender allows, and whether your loss payee is even named correctly. Start on the quote form or call or text 423-264-4255.
Common questions
Does my lender get to decide what truck insurance I carry?
On a financed or leased truck, effectively yes for the physical damage side. The loan or lease agreement normally requires comprehensive and collision at a value the lender approves, names the lender as loss payee so any claim check runs through them, caps your deductible, and requires notice before the policy cancels. Liability limits are still your call above the federal minimum. Call or text 423-264-4255 if you want your policy checked against your loan paperwork.
What happens if my truck insurance lapses on a financed truck?
The lender force places coverage, which means they buy a policy on the truck and add the cost to what you owe. It protects their collateral and not you, it carries no liability coverage, and it usually costs several times a normal premium. A lapse can also trip a default clause in the loan itself. Putting real coverage back in force quickly is almost always cheaper than letting force placed coverage ride.
Will physical damage pay off my truck loan if the truck is totaled?
Not necessarily. The policy pays actual cash value or the stated value on your schedule at the time of loss, and that check goes to the lender as loss payee. If you financed at the top of the used truck market and values have come down since, the payout can land under your balance and the difference stays your debt. Gap coverage is the product that closes that hole and it has to be in place before the loss.
Does running older trucks raise my truck insurance rate?
Age by itself matters less than the inspection record that comes with it. Underwriters read your Vehicle Maintenance BASIC, so brake, tire and lighting violations from deferred maintenance move your price more than the model year does. Older trucks also carry lower values, which can cut your physical damage premium. Get a truck insurance quote and we will show you which way your fleet actually prices.
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