I contacted John Dyer at HIL Fincial for a loan on an old Mack truck. I offered to put $2000.00 down on the truck. I was told by Mr. Dyer that I should keep my $2000.00 in the bank and lease the truck with 100% financing. I looked at several of these trucks and got quotes from Dyer as to the monthly payments. ALL the payments were at very high interest rates. For example, a $24,000.00 truck would have cost me $52,000.00 over a 48 month period. I tried to get Dyer to tell me what the interest rate was but never got an accurate response. Once he said it was 24.9% but then after doing the math it turns out the interest rate is actually 55%. Under normal circumstances, this would be loansharking. However, companies like HIL Financial, which is a third party originator for Financial Pacific Leasing, skirt the law by limiting loans to businesses. Loans to businesses are not protected by the Consumer Protection Act or state loansharking laws.
Here's how the transaction goes down with places like HIL Financial. You fill out a credit application and within 24 hours Dyer calls you and says you are approved. He then verbally quotes you a payment amount which is double what the cost of the equipment is you want to finance. After you find a piece of equipment you want, he sends you a proposal which you must sign and return to him with a non-refundable $350.00 origination fee and the frist payment for the equipment. You are then told that there is an additional fee for title transfer and sales tax which must be included in lease payments. After that you are emailed documents that reveal to you will actually be dealing with Financial Pacific Leasing in Washington state. The agreement between you and Financial Pacific does NOT allow for early buyouts and you are on the hook for all the interest and the principal for the life of the loan. Also, if the equipment becomes a total loss, you must satisfy the full amount of the loan PLUS the interest. Additionally, there is no grace period for late payments. Payments are due on or before the due date and if you are late, there is a 10% late charge PLUS they start calling you immediately and demanding the payment. For each call they have to make to you, you are charged $15.00.
Companies like HIL Financial and Financial Pacific feed off of new business owners who lack any track record. They are no different than the PayDay lenders or the mortgage brokers who destroyed the housing market. They have found a niche that allows them to rip-off small business owners—a niche that is still not yet protected by law. If you deal with these companies, you will pay a fortune in interest. The only differnce between them and a loanshark is that they probably won't break your legs if you are late with a payment—I wouldn't bet on it though.
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