Rx for CapX - Part III
- For vehicle purchases such as a car or pick-up truck I recommend a term loan not to exceed 4 years. Get the vehicle paid off before you need to replace it. By doing this you can reduce future maintenance and upkeep costs.
- Heavier rolling stock such as semi-trucks and trailers can extend to 5 years. Given wear and tear of these units, it’s best to keep the debt structured in a way that allows for a good residual value once the loan is retired.
- Software and hardware vary but a good starting point is to find a 3 or 4-year loan that is paid off before the technology becomes obsolete.
- Building improvements vary but can range anywhere from a 5 to 10-year amortization period or may be rolled into a new commercial real estate mortgage. If it’s an expansion to the existing building to accommodate more equipment, it’s best to look at a construction to permanent loan.