The Federal Reserve voted Sept. 16 to increase its target federal-funds rate by one-quarter of a percentage point, bringing the target range to 3.75% to 4.00%.
The Federal Open Market Committee said inflation remains elevated and described the increase as supporting a return toward its 2% inflation objective. The vote was unanimous.
For truck drivers, owner-operators and small fleets, the federal-funds rate may sound far removed from everyday trucking.
It isn't.
Why Trucking Should Pay Attention
The Fed does not directly set the interest rate on your next Freightliner, Peterbilt or Kenworth.
But changes in its benchmark rate influence borrowing conditions throughout the economy.
That can eventually affect financing for trucks and trailers, business credit, credit cards and other loans.
For an owner-operator purchasing expensive equipment, seemingly small changes in financing costs can become significant when spread across years of payments.
That makes the total cost of financing just as important as the advertised price of the truck.
Equipment Decisions Become More Important
Trucking already operates on thin margins.
Fuel, maintenance, insurance, tires, permits and unexpected repairs consume revenue quickly.
Add a higher equipment payment and the margin for error becomes smaller.
Before financing equipment, drivers should look beyond:
"Can I make the monthly payment?"
The better question is:
"Can the business support this payment during a bad month?"
Run the numbers using conservative mileage and revenue assumptions.
Account for downtime.
Account for maintenance.
Account for insurance.
Account for weeks when freight isn't paying what you expected.
A truck that only works financially when everything goes perfectly probably doesn't work financially.
Watch the Total Financing Cost
Drivers shopping for equipment should compare more than the payment.
Look at the interest rate, term, down payment, total amount financed and total amount ultimately paid.
Extending the loan term can reduce the monthly payment while substantially increasing total financing costs.
Understanding those numbers matters.
The Bigger Economic Picture
The Fed says economic activity remains solid but inflation remains elevated. Its September projections show policymakers still expect inflation to moderate over time, though individual projections for future interest rates vary.
Nobody should make a truck-purchase decision based solely on guessing what the Federal Reserve will do next.
Build around the numbers available today.
If financing conditions improve later, refinancing may become an option. If they get worse, your business still needs to survive.
GladHands Pro Driver Takeaway: Don't buy a truck because you can qualify for the payment. Buy equipment when the numbers show the business can carry it through good months and bad ones. The Federal Reserve's official Sept. 16 statement confirms the quarter-point increase and 3.75%–4.00% target range.
