Getting the timing spot on with the acquisition of new trucks can be significant to cashflow, ROI, tax benefits and getting the best truck finance deal. During the period of record low interest rates after the RBA slashed the official cash rate to support the economy during the pandemic, there were clear incentives to acquire new trucks with finance.
But now the economy is in the so-called recovery phase, and with global issues impacting the Australian economy, the signs may be a little harder to read as to when is the best time to upgrade with finance. A wide range of factors may need to be assessed and considered to arrive at a decision around if the timing is appropriate for the business to make such a significant investment.
Assessing a range of data, conditions and outlook for the economy may assist businesses to decide when the time is ideal for their operation to acquire new vehicles with truck finance. Economic conditions are currently in focus and staying across information from the Australian Bureau of Statistics (ABS), the Reserve Bank and other authorities and government agencies may be beneficial.
We bring together some of the latest data, issues and conditions to assist operators with their acquisition decisions.
Labour Situation
The tightness in the Australian labour market has been a major issue for many businesses. As noted several times by RBA Governor Philip Lowe, the tightness in the labour market is constraining many enterprises from operating to full capacity.
The extremely low unemployment figures are evidence of the skills shortage. But the unemployment figures actually increased by 0.1% to 3.5% in August after months of continuous falls. This may be a sign that staff are becoming more available and as such businesses may look forward to being able to fill those vacant positions and return to full capacity.
Other positive indications may be in the immediate actions to be taken following the recent Summit around Jobs and Skills. Those actions include an increase to the intake of migrants to fill jobs; addressing delays in processing visas; changes to overseas students working regulations; and limits to aged pensioner income conditions.
Latest Consumer Spending Figures
Post-pandemic, consumer spending has been at extremely high levels. This high level of demand has come at a time of limited supply in areas and is seen as a major reason for soaring inflation. The latest consumer spending data for August was released by the ABS and shows another uptick in retail turnover.
This is the 8th monthly rise in a row and the ABS’s Ben Dorber reports it was driven by increases in the food-related sectors – food, cafes, takeaway outlets and restaurants. The results for non-food spending was mixed. Spending on items such as footwear, personal accessories and clothing fell by 2.5%.
These latest figures may be somewhat of a two-edge sword. One the one hand, consumers are still spending up big. This could be a positive sign for some businesses, depending on the industry sector. Indicating that demand is still high and representing good times ahead for the business.
On the negative side, the continued high spending levels by Australian consumers is seen by some that the RBA interest rates are perhaps not having the desired effect to curb spending. Or at least not to the extent that may have been expected. Though Governor Lowe has repeatedly stated that rate increases do take time to show an impact.
This negative side may indicate further and possibly stronger moves by the RBA.
Interest Rates
Which brings in the conversation around interest rates. The issue which is critical to the overall cost of truck finance. The RBA Board meets this week with another interest rate rise imminent. The exact amount – 0.25% or 0.5% is to be seen. Further rises may be required as the RBA considers the data and global impacts especially at the moment, issues around the UK economy.
In the light of rising rates, operators will be seeking the cheapest truck finance interest rates possible. Rates that we continue to deliver across our loan portfolio.
Tax Measures
The tax measure of temporary full expensing is due to expire at the end of the current financial year. Eligible businesses will need to have eligible assets operational in the business prior to the cut-off date of June 30 next year to be able to take advantage of this measure. It is a very attractive measure which operators can discuss with their accountant.
Chattel Mortgage or Equipment/Heavy Vehicle Loan, known for its suitability in capitalizing on this tax measure, is widely considered the prime option. How Chattel Truck Mortgage Loan Works becomes especially relevant in this context. Moreover, it's important to note that this form of finance also brings the added benefit of a lower interest rate when compared to alternatives such as Truck Leasing and Rent to Own.
Acting now or very soon may enable operators to maximise the value of new vehicles with this accelerated asset depreciation measure. Contact us for a quick quote to assist with planning and budgeting or to get started with a finance application.
Moving Forward
Later in October, the Treasurer Jim Chalmers is due to bring down his first budget. The Treasurer has said it will be a ‘bread and butter’ budget as the Government looks to tackle the debt situation, much of this as a result of pandemic support. Remember, as interest rates rise for businesses and consumers, they also rise on Government debts. So, with the current borrowings accruing higher interest charges than were in place initially, No Deposit Truck Finance becomes an even more appealing option for businesses.
All eyes, no doubt, will be on this major announcement as to how it may shape business prospects moving forward.
Time to Act?
If consideration of the available data and the overall assessment of the economic indicators point to good timing for an investment in new vehicles, then talk with us about cheaper truck finance.
Contact Jade Truck Loans on 1300 000 003 for cheaper truck finance.
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.
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