Before the world stopped turning in 2008, these loans were easy to qualify. In today's environment, only the "best of the best" will qualify.
FICO score almost always has to be above 700 (truth be told over 750)
Debt to Income ratio (DTI). You must be below a 40% debt to income ratio which includes your new horse trailer payment. In other words, if you make $10,000 per month, your monthly debts including your mortgage, credit cards, auto loans, student loans, horse trailer loan can't exceed $4,000 per month. (hence $4,000 is 40% of $10,000)
Proof of Income required: If you are self employed, that's okay. However, be prepared to cough over your tax returns and your return for the last two years must show enough income so you are below the 40% DTI.
Upside down loan: Let's be realistic...if you spend $20,000 on a trailer, plus most states charge 7-8% sales tax and registration fees, your total purchase price ends up being closer to $22,000. You pay 10% down or $2,000 and finance $20,000 on a $20,000 trailer for 10 years. Do the math: At the end of three years "life happens" and you need to sell your trailer. Guess what, you still owe over $15,000 on a $20,000 trailer. Yup. Indeed you are probably "upside down" in your loan and you are truly responsible for the $15,000. Chances are you will have to shell out more cash all at once when you sell your trailer to cover the delinquency. Hopefully you aren't selling due to health, job loss, divorce or other catastrophic circumstance as it's likely "cash will be tight". So having to come up with "extra" to pay for a trailer you need to move quickly isn't ideal. In fact, it could hurt your stellar score you've worked so hard to build.
Do you honestly want (or plan) to pay on a horse trailer for 10-12 years?
Loan must be in your personal name (not a business name).
Sales tax must be paid in full up front.
Flex Lease--Advantages of Lease to own
A horse trailer lease would be similar to an automobile lease. Since you aren't "paying" for the full amount of the trailer over the term of the lease, it tends to be less expensive than conventional financing.
Easier to qualify for a lease than a "Recreational vehicle" installment loan.
Shorter term up to 48 months. This greatly reduces the chance of being "upside down" compared to long term financing where you are locked in for 10-15 years.
Can be in a business name and if used for business purposes, entire lease payment can be "expensed" from taxes (check with your CPA first).
At the end of the lease, you can do one of three things 1) purchase the trailer for the residual amount 2) trade in the trailer for another Double D Trailer (with the trade equity applied to your new trailer), or (3) turn in your trailer and walk away without any obligation.
Equity builds up much faster in a lease compared to long term financing where you have no equity until you are several years into the loan.
You only pay sales tax "per monthly payment". Compared to regular financing where the full tax has to be paid up front, and included in your loan amount. (So you end up paying interest in sales tax).
The shorter lease term of 48 months typically results in a higher monthly payment compared to financing 10-15 years. Consider a 15 year home mortgage compared to a 30 year mortgage (the 30 year cost less per month, but 15 is much better if your budget will allow it).
Interest rates aren't really applicable on a lease but the effective rate is normally higher in comparison to a conventional installment loan.
If you sign up for a four year lease and try to "walk away" at the end of three years, you are responsible for the remainder one year whether you use your trailer or it sits. You are required to fulfill the full term of the lease.
Horse Trailer Leasing versus Financing
Leasing a $20,000: 10% down = $2,000, term 48 months. Monthly payment estimate including sales tax =$416 per month.
Financing a $20,000: 10% down = $2,000, term 48 months. Monthly payment estimate including sales tax = $465 per month.
Summation: Leasing isn't for everyone, but is a great alternative to a conventional loan.