Adhering to schedules is an intrinsic demand within the trucking and transport industries. Owners and operators are acutely aware of the potential costs and disruptions that can arise from delays, jeopardizing planned schedules. Failing to meet customer deadlines could result in contract losses, while extended job durations might lead to missed opportunities for subsequent jobs. Time holds immense value in the transport sector, where it directly translates to financial gains. However, the significance of timing might not be fully appreciated by all operators when it comes to acquiring a new truck and securing truck loans.
Given the prevailing uncertainty stemming from the ongoing COVID-19 situation, some sectors may exhibit hesitancy in committing to new vehicle investments at this juncture. Many might deem it prudent to wait and gauge the unfolding circumstances before making substantial financial commitments.
Nonetheless, various developments are unfolding on both domestic and global fronts that could suggest that acting sooner rather than later is advantageous for investing in new trucks. We offer our perspective and insights to assist truck operators in strategically timing their truck loan and purchase decisions, enabling them to attain the most advantageous outcomes.
Lending Interest Rate Market
Starting with the bottom line – the historic low cash rate set by the RBA since November 2020 will not last forever. As we have regularly reported after the monthly meetings of the RBA Board, Governor Philip Lowe has remained relatively consistent with stating that it was not expected that the conditions would be right to trigger a rise in the cash rate until 2024. Those conditions being inflation sustained in the 2-3% range and lower unemployment and to a lesser extent stronger wage growth.
Recent times have witnessed a notable surge in inflation, accompanied by a sustained downward trajectory in unemployment levels, even amid the repercussions of the Omicron variant of COVID-19. Keeping abreast of financial and economic discourse, you might have come across predictions from certain quarters foreseeing an imminent rate increase. Some sources have boldly projected a rise prior to the next Federal Election, while others speculate that the Reserve Bank of Australia (RBA) could enact a rate hike during its August meeting. The forthcoming RBA Board meeting, scheduled for February 1, holds potential for shedding light on their intentions, as articulated in the accompanying statement concerning interest rates.
The official cash rate does form a basis point from which many banks and lenders set their truck loan interest rates for the different lending sectors. But lenders are not bound by this and some banks have already moved on their home loan rates.
For those contemplating a truck purchase with finance securing that truck loan before interest rates increase could represent a significant savings on the overall cost of the loan. To see how much on a monthly basis a higher interest rate loan could cost, simply refer to our Truck repayment Calculator and vary the rate while keeping the other data steady.
Timing a truck purchase and loan while rates are at historic lows is clearly the way to go, if the business is in a position to do so.
Truck Acquisition Timing
In a conventional business landscape, truck owners and operators typically base their decisions regarding vehicle upgrades on unique business circumstances. These decisions may revolve around factors like vehicles reaching the end of their optimal operational life or adapting to evolving contract requirements, among other considerations.
However, as we've been incessantly reminded in recent years, these times are anything but normal. The pandemic has unleashed an array of challenges for businesses worldwide, creating an environment that departs significantly from the ordinary. When it comes to purchasing a new truck, one of the foremost obstacles for many has been availability. Production disruptions caused by staff shortages and other pandemic-related issues have led to considerable delays in goods delivery. While numerous trucks are assembled in Australia, a substantial portion of components and parts are sourced from overseas factories.
Nevertheless, the most daunting challenge that continues to plague the manufacturing sector is the shortage of computer chips. This scarcity has caused production bottlenecks across various industries, including the manufacturing of trucks, and it appears this challenge will persist for some time. Consequently, securing the desired truck at the desired time is becoming increasingly challenging.
For operators considering a new truck acquisition in the near future, it might be beneficial to expedite that decision in order to secure the current inventory of their preferred make or model. Timelines for deliveries will naturally fluctuate across the market. If evaluating multiple makes or models, our calculator can assist in comparing the variance in estimated loan repayments, providing valuable insights for the decision-making process.
Timing to Capitalise on Tax Deductions
IAWO and temporary full expensing have been extremely popular with operators upgrading trucks within the timeframe of the measures to realise the significant tax deductions on offer. For eligible businesses and eligible asset acquisitions, temporary full expensing is available until end of June 2023. But to realise the deduction in this financial year, the truck will need to be acquired and operational in the business prior to the end of this financial year.
There are some very strong reasons why timing that truck buy and especially the truck loan can be impacted by timing. Capitalizing on the current historic low-interest rate situation by investing in a new truck can present a very cost-effective outcome for operators. For further insights and to address any inquiries, including General Enquiries, we're here to assist you in making the best decisions regarding your truck purchase and financing strategy.
Contact Jade Truck Loans on 1300 000 003 for a loan quote on cheap 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.