Commercial Truck Finance In 2022: What You Need To Know?

Commercial truck finance can be a little tricky to navigate, but with the right information, it can be an easy process. Many different lenders offer commercial truck loans, and each has its own set of eligibility requirements and interest rates. In this article, we will explore what you need to know about commercial truck finance in 2022.

What is truck finance?

When you're looking to purchase a new truck, buying it outright might not be the best financial decision for your business's cash flow. A truck loan allows you to purchase the right new or used truck without having to pay the full price upfront.

You have several truck finance options available; each with its own pros and cons. These include leasing, hire purchase and a chattel mortgage which all have their own unique features. Each loan type gives you the flexibility to tailor loan terms and your regular repayments. 

What types of heavy vehicles can I finance?

Truck financing allows you to purchase a wide range of trucks and heavy vehicles to get your business moving.  These include:

• Flatbed trucks
• Semi-trailers
• Refrigerated trucks
• Concrete Mixers
• Dump trucks
• Water trucks
• Prime movers
• Front end loaders

What are the benefits of truck finance?

There are many benefits that come with financing your next truck purchase including:

- You can get the truck you need without having to pay the full price upfront

- You can tailor the lease term and repayments to match your businesses needs

- You may be able to claim a tax deduction for the interest you pay at tax time. 

- There are many different financing solutions available to suit your needs

With the benefits, come some considerations 

Before financing your next purchase, you should consider:

- The total cost of the loan including interest and fees

- Your eligibility for different financing options

- What do you require the vehicle for and how long do you need it

- The impact of the loan on your business’ finances

- Will the new vehicle be used predominantly for business use? 

When you've considered all the factors, you'll be in a better position to make an informed decision about which truck loan is best for your business.

How can I finance the purchase of my truck?

There are three common ways you can finance the purchase of your heavy vehicle:

1. Leasing options include an Operating lease & finance lease

A lease is a contract between you and the lender where you agree to pay a fixed amount each month in exchange for the use of the vehicle. At the end of the agreed term, you may have the option to buy the truck for its residual value or return it to the lender. It is important to remember that with a lease, you do not own the vehicle so there may be restrictions on how you can use it.

2. Commercial hire purchase 

Your business hires the heavy vehicle from the lender for an agreed period. You will make fixed monthly payments until the loan is paid off. During the repayment period, you don't own the vehicle, however, once the loan is paid in full, ownership of the truck will be transferred to your business.

3. Chattel Mortgage

A chattel mortgage is a secured loan which uses the vehicle you are purchasing as security. If you default on the loan, the lender can repossess the vehicle. Unlike a commercial lease or hire purchase, you take immediate ownership of the vehicle so there are no restrictions on its use. When the loan is paid in full, the mortgage will be removed from the vehicle.

How do I decide which type of finance is right for my business?

When you are considering the financial options available, you also need to ask yourself a range of questions to help decide which route to take. These questions should include:

• Can your business afford the repayments? Be realistic about what you can afford. You may have some flexibility when it comes to the term and repayment amount. However, it's important to consider the purchase price and stick to your budget. 

• Can you afford to make residual or balloon payments to take ownership of the vehicle? Leasing and chattel mortgages may require you to make a residual payment at the end of the term of the loan. However, you do have some options when it comes to the amount of the payment.

You can make higher monthly repayments to reduce or eliminate the payment at the end of the loan or make lower repayments and pay a higher balloon payment. But don't worry, you do have the option to refinance the balloon payment if you need to.

• What are the ongoing costs associated with each type of finance solution? There may be additional fees and charges associated with each type of finance. That's why it's important to compare these before deciding. For example, when leasing a vehicle, you may only be allowed to travel a certain number of kilometres per year. If you go over this, you may have to pay additional fees.

• Do you want to retain ownership of the truck beyond the loan term?  You may only need the vehicle for a short period or may need to update your truck on a regular basis. If this sounds like your business, a lease may be a better option.

What are some of the other things I need to consider when comparing financial options?

• Eligibility - Being a new business, your credit score and your age may impact your eligibility for some types of finance. Many businesses and sole traders may not meet their lender's criteria for a truck loan or equipment finance. But don't despair, speak with your finance broker! As your finance specialists, Finance Brokers NSW have access to a wide panel of lenders with competitive interest rates and finance deals.
  
• Interest rates - You should the interest rate and how much you will pay in interest over the loan term. The interest rate will affect your repayment and the overall cost of the loan. Truck loans with fixed interest rates can assist you with your business's budget. 
  
• Loan term - The term of the loan will affect your monthly repayments and how much you pay in interest and monthly fees and charges. The longer the term, the more you will pay. 
  
• Fees & Charges - These will have an impact on your repayments, so it's important to compare these before making a decision. Some of the fees and charges you may need to consider include application fees, monthly service fees and a fee if you repay the loan early.
  
• The comparison rate - This rate is a great way to compare the cost of different loans. It takes into account the interest rate, fees and charges, so it's a good way to compare apples with apples.
  
• The age of the heavy vehicle - Truck loans aren't just for a new truck! It's about finding the right truck to help your business grow. A truck loan can finance the purchase of a second-hand heavy vehicle. However, there may be age requirements you'll have to comply with so discuss this with your finance broker.
  
• Tax treatment - Speak to your accountant for advice about the tax benefits of each loan. Their expert knowledge will help you make the most tax-effective option for your business.

Your truck finance questions answered

Once you have found the right vehicle, finding the right loan is the next important step. With such a wide range of finance options available, talking to a finance broker specialising in commercial truck finance is a great way to get started.

Talk to us at Finance Brokers NSW

Finance Brokers NSW are your financial professionals when it comes to equipment finance and commercial truck financing.  Our Team can answer your business finance questions and help you compare a range of loans from multiple lenders on our panel. 

We help you through every step of the application process and give you the best chance of having your loan approved. We offer a free, no-obligation consultation so please call today.