If you’ve read our commentary on the recent statement by the Reserve Bank of Australia (RBA) regarding the outlook for interest rates, or if you’ve been listening to news reports on the prospect of a rate rise, you’ll be across the fact that interest rates are set to rise in 2022. This is a significantly different scenario from say a year ago when the situation was looking like the RBA would not move on interest rates until around 2023 or even 2024. So does a rate rise signal farewell to cheap truck loans?
Yes and no. Yes, if rates go up across the lending sector, a truck loan secured after the rate rise will naturally incur a higher rate compared to the pre-increase period. However, these dynamics are context-dependent, and our unwavering commitment at Jade Truck Loans is to continue delivering optimal outcomes. Using Jade Truck Lending, our track record of securing the best truck loan rates over the past 20 years stands as a testament to our dedication. Hence, while a cash rate hike by the RBA may signal potential challenges, it does not impede our ability to consistently secure more favorable interest rates for our valued customers.
As signs increasingly suggest a potential cash rate increase in June, business owners can proactively explore a variety of strategies to maintain access to affordable truck loans. Recognising the nuances of truck finance, we have compiled a comprehensive guide outlining numerous tactics that truck operators might contemplate. This guide is intended to assist in securing cost-effective and highly competitive truck loans, even as broader lending rates show indications of potential ascent around the middle of the year.
While it might seem straightforward and evident, the act of advancing your truck purchase to the present moment, as opposed to delaying it until later in the year, could potentially yield benefits in the form of reduced interest rates and lower repayment amounts. Given prevailing supply constraints, numerous buyers have been compelled to postpone their purchase intentions due to the sluggish availability of vehicles.
Perhaps now is an opportune juncture to contemplate your secondary truck preference, rather than waiting for the initial choice to become attainable. This strategic approach could yield advantages in terms of securing favourable terms and conditions.
Choice of Truck Loan Type
The truck finance & leasing interest rates vary across the range of truck loan products:-
- Chattel Mortgage for truck & trailer finance
- Rent to Buy
- Hire Purchase
Chattel Mortgage, which is also referred to as Heavy Vehicle or Equipment Loan, typically attracts the lowest rate across the selection. So if you have always selected one of the other loan types which attract a higher interest rate, perhaps it’s time to reconsider.
By referring to our Interest Rate Calculator, you can easily see the variations in estimated truck loan repayments across our loan portfolio.
Choice of loan type will depend on suitability to the individual business operation and especially being in sync with accounting practices and financial objectives. We always recommend that our customers discuss loan type selection with their accountant.
Factor in Tax Benefits - IAWO
Consider leveraging the available tax incentives to counterbalance any potential rise in repayments subsequent to an increase in interest rates. The Instant Asset Write-off, for instance, enables eligible businesses to deduct the acquisition cost of qualifying assets, including new trucks, within the same financial year they are acquired.
This mechanism can furnish a noteworthy advantage in mitigating other cost escalations. Notably, Chattel Mortgage is often viewed as the most suitable financing option for capitalising on the Instant Asset Write-off benefits.
Focus on Repayments not Rates
When embarking on a financing arrangement, the interest rate naturally assumes a pivotal role. At Jade, our primary emphasis lies in securing improved interest rates, as this constitutes the principal determinant shaping the overall loan expenditure. However, given the looming possibility of future rate increases, business operators can adopt a slight shift in perspective. It's prudent to redirect attention towards achieving the most economically efficient outcome – a loan that harmonizes with cash flow – by placing greater emphasis on the truck loan repayments.
In this context, the monthly repayment figure gains significance. Our adept consultants collaborate closely with our clients to tailor each loan to their specific needs. This involves engaging in negotiations with our panel of lenders to attain the desired loan term and/or balloon amount that aligns with the preferred repayment structure. This personalised approach ensures that the loan arrangement is optimally attuned to individual requirements.
Referring to our Truck Loan Calculator, you can see how a longer loan term reduces the monthly repayment. It will take longer to repay the loan and own the truck and more interest will be payable. But this strategy make keep monthly outgoings in check with cash flow.
The same strategy can be applied to the balloon or residual. Varying this amount impacts repayments.
Address Credit Profile
Truck finance lenders will assess the credit score or rating of applicants when preparing a truck loan offer. As a rule of thumb, the better the credit rating the cheaper the truck loan interest rate offered. Addressing any issues with the business credit rating may result in a better interest rate.
For sole traders, addressing individual credit profiles is also important as these can also be assessed.
Optimise Broker Style Services
As the likelihood of broader rate increases becomes more certain, the significance of possessing comprehensive access to financial solutions across the market is poised to grow even more pronounced. Savvy operators have already recognised the advantages inherent in utilising the broker-oriented services provided by Jade Truck Loans. Our accreditation extends to major and second-tier banks, in addition to an extensive array of non-bank lenders.
Notably, our non-bank lending partners frequently exhibit a heightened degree of flexibility when it comes to negotiating truck loan interest rates and loan structures. Many of these lenders remain committed to maintaining their competitive edge by extending the most appealing loan rates. It's important to note that access to numerous specialist lenders is only attainable through intermediary broker services such as Jade Truck Loans.
To encapsulate, there exists a range of approaches that truck operators can adopt to effectively mitigate loan repayments and secure the most competitive interest rates, even in the event of an RBA cash rate increment. Engaging our services emerges as a fundamental strategy within this context.
However, the viability of any strategy hinges upon the distinct business objectives, operational framework, and other unique aspects pertaining to the enterprise. In light of these individual considerations, the appropriateness of a strategy can be effectively determined.
Contact Jade Truck Loans on 1300 000 003 to discuss achieving the cheapest interest rate truck loan.
DISCLAIMER: THIS INFORMATION IS ISSUED PURELY FOR THE PURPOSE OF GENERAL INFORMATION PROVISION. IT IS NOT TO BE TAKEN AS THE ONLY SOURCE OF INFORMATION FOR BASING FINANCIAL DECISION-MAKING. THOSE REQUIRING FINANCIAL GUIDANCE AND ADVICE SHOULD CONSULT WITH THEIR FINANCIAL CONSULTANT OR ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY MISREPRESENTATION OF POLICIES, DATA OR ERRORS IN THIS CONTENT.