Confusion over RBA Announcements on Interest Rates
Reading our posts or other media coverage of the recent Reserve Bank of Australia (RBA) announcements can understandably result in some confusion about interest rates. As one commentator described recent RBA discussions, the Board sees conflicting signs with what is driving inflation and what’s happening in the economy.
There have been many consistencies in the RBA messaging since the rate increases started in May 2022. But more recently, the outlook has become more – confusing. At least for those trying to plan major acquisitions with finance and trying to set budgets. Will rates keep going up? If so, by how much? Will the increases stop soon? Will there be a point when rates are actually cut?
Here’s a brief recap of why some may be confused and unsure of how to plan and proceed with truck finance. While banks and non-bank lenders set their own lending rates based on individual decisions, those decisions are very much directed by the RBA’s cash rate decisions.
Lenders and those seeking finance typically look to the RBA’s outlook for direction. After a long run of 0.25% rate rises, the minutes of the RBA Board’s December meeting revealed that a higher increase of 0.5% and a no increase as well as the final decision of a 0.25% rise were discussed.
But at the February meeting, no pause was discussed and the key word in discussions was uncertainty. In the minutes of the RBA March Board meeting the pause in rates is now back in the mix. But in the same document stating that it would be discussed at the April meeting if conditions were right for a pause was the statement that further rises will likely be required.
The RBA is awaiting further data to assess and that includes the latest CPI and employment figures from the Australian Bureau of Statistics. In the meantime, those seeking finance to make new truck purchases before end of financial year may be uncertain as to which scenario will eventuate. Hence the uncertainty. But when other deadlines are pressing – the need to update ageing vehicles, get acquisitions concluded before end of financial year, need to expand fleet for new contracts, decisions must be made.
When uncertainty prevails, it can be even more important to use experts to facilitate moving forward with major business decisions. Jade Truck Loans assists business owners to source and get approved for achieve cheaper truck finance even when the interest rates outlook is uncertain.
Access to Larger Lending Market
There are many aspects to sourcing the best truck finance that will work for the business. These include initially identifying which lender is offering the best rates, the most appropriate loans, and is flexible and open to negotiating.
The commercial lending market is vast, with a plethora of non-bank lenders adding to the banking sector. Many of the non-bank lenders are not easy to find as they operate through their select broker network, not directly with customers.
That is a key area where we assist customers. Opening up access to more lenders and going further by actually sourcing the best truck finance offer and handling negotiations, including options like No Doc Truck Loans.
Is the finance product the most cost-effective option?
Interest rates are certainly the main focus for us and our customers when it comes to cheaper truck finance. The rate sets the overall cost and essentially the repayments. But the selection of the most appropriate finance product can be a major contributor to the overall cost-effectiveness of the acquisition and whether it is the best truck finance for your business.
The selection of finance products – Lease Commercial Vehicles, Chattel Mortgage Truck Loan, Rent to Buy Truck Loans and Commercial Hire Purchase, vary in suitability for different business set-ups and in other features and benefits. The best truck finance will be the one that will work with the financial objectives and aims of the business.
Speak with your accountant on the selection, as many of the different loan features relate to accounting issues. Consider Truck Finance Interest Rates and other factors when making your decision.
Tax Benefits to Offset Costs
An important part of the finance product selection process is the tax benefits of each loan type. Tax deductions can offset the overall cost of the acquisition. All commercial loans include tax-deductible elements.
At times, the Federal Government will introduce special measures for a limited time period to encourage businesses to invest. One such measure is temporary full expensing, which most business owners are now well aware of. It has been available since April 2020 and expanded and tweaked a few times over the past 3 years. The deadline for taking advantage of this measure is 30 June 2023.
Chattel Mortgage Truck Loan is the most appropriate form of finance to utilize temporary full expensing. The tax deduction realized in this financial year may represent a valuable offset to investing in new trucks at this time, including Used Truck Finance options for pre-owned trucks.
Truck Finance Rates
Now back to interest rates. The outlook is uncertain. The next meeting of the RBA is Tuesday 4 April and that is when the next decision on the cash rate will be announced and when the Board’s latest outlook will be revealed.
Since the RBA March meeting, a number of factors that may influence the decision have emerged. These include unemployment falling and major issues with a number of banks in Europe and the USA. More data on the Australian economy will be released prior to the April meeting.
Some lenders may move on their own rates based on advice and forecasts from their own analysts while others will wait for the RBA to take the lead. Regardless of which way the RBA and the lending market moves in coming months, your Jade consultant will be sourcing the cheapest rates and overall most cost-effective finance solution for your business.
Contact Jade Truck Loans on 1300 000 003 for cheaper interest rates and better truck finance solutions.
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.