Truck Finance in Australia
Many businesses depend on trucks to carry out their operations. Given that your truck is both your calling card and often the lifeblood of your business, it makes sense that you want the right vehicle for your needs. Understanding the truck financing process is key to your success.
What is truck finance?
A truck loan is a special type of business vehicle loan focused on heavy vehicles that are used by Australian businesses. Truck finance lenders work with all kinds of business entities: sole traders, partnerships, Pty Ltd companies, public companies, and large private corporations.
The goal of this process is to split up the cost of a truck purchase over a long period of time to make it more accessible to the business. While some believe that you can only do this for new vehicles, in reality there are many used truck financing options out there as well. Many strategies for finding the best car loans are also applicable when searching for the best truck loans.
Which trucks can I finance?
Truck loans are available for numerous different purposes. The vehicles themselves are often categorized as light, medium, and heavy duty trucks, each of which has various applications. Some industries that rely on truck loans include farming, earthmoving, construction, mining, and transportation.
What are the types of truck loans?
Every company has unique needs; therefore, every company will want to finance their trucks differently. Commercial truck financing is done through banks, non-bank lenders, vehicle finance brokers, vehicle dealerships, and other providers. Some of the most common options include:
A chattel mortgage
is popular for business vehicle purchases and lets you take you immediate ownership of the truck, but still allows the lender to seize the vehicle in the event of non-payment.
A commercial hire purchase
lets you use the truck for business purposes while making monthly payments, and then automatically grants ownership once the loan is paid offin full.
A finance lease
is similar to a commercial hire purchase in the sense that you get to use the truck for business, but taking ownership of the vehicle is optional and not assumed
An operating lease
is another temporary use agreement like a hire purchase or finance lease, but here you have but you have no intention of taking legal ownership of the truck
A business car loan
is an ordinary vehicle loan not specialized for truck purchases, and also requires the truck to be used for business more than 50% of the time.
How can I apply for a truck loan?
Truck loans often come with a list of strict requirements, so it’s good to know what these are before you dive into the process. Check whether you satisfy all of the below:
- Applicant must be at least 18 years old
- Applicant must be an Australian citizen or permanent resident
- Applicant must own an Australian business with a valid ABN or ACN
- Business must be GST-registered
- Business must have been operating for at least two years (younger businesses may get denied or charged higher interest rates)
- Business must meet the lender’s minimum turnover requirements (usually at least $75,000 or $100,000)
- Business must have less than the lender’s maximum level of existing debt (usually $1 million)
- Business must be able to prove ability to service the debt or afford the lease payments
- Vehicle must be used primarily for business purposes
Throughout the application process, you may be asked to provide some or all of the following information:
- Loan details: These will include the amount of money the business requires, how soon it needs it, and the detailed reasons for getting the loan.
- Personal details: These normally consist of your name, contact information, and driver’s licence number.
- Business details: These are made up of your business name, entity type, business address, estimated annual revenue, time in operation, and monthly expenses.
- Bank statements: These entail the last three months of bank activity and are a standard way of verifying the business’ financials.
What’s the best way to compare multiple truck financing options?
Due to the complexity of truck loans and the large sums of money involved, you naturally want to make sure you’re getting the best deal possible. There is no single number that tells you everything you need to know about a loan. Instead, you have to consider the main features of the loans, including these:
Interest rate: the amount you’ll pay in interest will affect both the monthly repayments and the overall cost of the whole loan.
Loan term: the duration of the loan could be anywhere from one to seven years, though it’s most likely to range from three to five, or 36-60 months. Shorter loan terms have higher monthly payments but may save you money on the overall interest paid.
Fees: the lender is likely to tack on additional fees throughout the life of the loan. These fees could include application fees and account-keeping fees, as well as early payment penalties.
Repayment flexibility: the schedule on which you make your repayment installments should be convenient for you and should suit your business cash flow. This can be weekly, fortnightly, or monthly.
Tax benefits: the truck loan could be set up in a way to yield certain tax benefits to the company, so it’s worth asking truck finance brokers about their options here.
Truck Finance FAQ
Truck Financing Conclusion
Truck loans are a great strategy for breaking up the cost of a business truck over a long period of time. Given that some heavy vehicles can cost hundreds of thousands of dollars, this is a very important resource for business owners. One of the best things you can do for your business is doing your research on commercial truck finance and seeing what options are there for you.