If you have any form of loan, then chances are you paid attention when you heard 'cut to interest rates' in the media on 3 November. With the buzz about Compare Truck Loans & Finance Options From Major Lenders in recent times, it’s no surprise that many are keen to Get Approved. While there was a lot happening both in Australia and around the world on the first Tuesday in November 2020 – the Melbourne Cup and US Presidential Election to note just two major events – the meeting of the Reserve Bank board could be the most significant in terms of your business.
As a lender, our team at Jade Truck Loans closely watch the outcome of the monthly RBA board meetings to see how there may be a benefit for our customers. November’s meeting did not disappoint with Governor Philip Lowe announcing a reduction in the official cash rate.
We’re committed to achieving the cheapest truck loan interest rates for our customers and any reduction is welcome news. Specifically, the cash rate has been reduced by 15 basis points to 0.1%. Sorry, that doesn’t mean we can offer Jade Truck Loans customers 0.1% interest rate truck loans. But stick with us as we explain what it all means and introduce you to our Easy Online Truck Finance Interest Rates Quote.
Cash Rates, Basis Points and Your Truck Loan
The ‘official cash rate’ which is set by the RBA does not represent the interest rate which may apply to finance such as truck loans. It essentially is the interest rate that banks pay on funds acquired from other banks and the RBA to source their own reserves.
As the official rate, it does flow on to impact the interest rates that both individuals and business pay on some loans. We specify ‘some’ loans as a change in the official rate does not change repayments on all existing loans but it may have an effect on new loans.
The RBA talks in basis points which is .01% and this November 2020 change was a 15 basis point reduction from .25% to .1%. Meaning the banks can source funds cheaper and as such pass that on to business and individuals.
The strategy behind the current interest rate cuts in 2020 is to support and strengthen the policies introduced by the Federal Government to support and stimulate the Australian economy which has been seriously impacted by the coronavirus pandemic.
When banks can access funds at lower costs, they have the potential to offer cheaper finance to businesses. This, in turn, encourages investments in new equipment, leading to business growth and job creation—an essential aspect of the economic cycle.
The impact of an interest rate cut by the Reserve Bank of Australia (RBA) lies in which banks pass on the cuts and which loans benefit from them. Currently, several major banks and a selection of smaller lenders have announced reductions in interest rates for certain home and business loans.
Interest rate cuts typically have an initial effect on the home mortgage market since these loans have different structures compared to, for instance, truck loans. At Jade Truck Loans, we arrange our truck loan deals at a fixed interest rate. This implies that the rate remains unchanged throughout the entire loan term, providing our customers with certainty over the long haul—especially considering truck loans can span 7+ years. While a rate reduction might sound appealing now, it's essential to consider the possible scenario of rates rising, leading to increased repayments. Be careful what you wish for!
So our customers on existing fixed interest rate truck loans with lease, rent to own, CHP and Truck Chattel Mortgage will not be impacted by the change in the official cash rate.
When and if the interest rate cut starts flowing through our lender panel into the truck finance sector, we will be adjusting our advertised truck loan rate accordingly.
Those considering a new truck loan may benefit from the rate cut. So now might be a good time to make the move.
Should I refinance my truck loan?
When interest rate cuts are announced, it is common for some businesses to have knee-jerk reactions, wanting to refinance to the new, lower rate. As a finance provider, we do offer refinancing services. However, it's crucial to consider some factors before making a decision.
Refinancing involves securing a new finance contract to cover the outstanding balance of an existing loan. Indeed, obtaining a new loan at the current lower interest rate could result in lower repayments, especially if your existing truck loan was established at a higher rate.
If your business has undergone changes since you initially took out your truck loan, there might be valid reasons to seek an adjustment to your debt obligations through refinancing. Consolidating multiple truck loans into a single one could be a desirable option in such cases.
However, the fees and charges associated with refinancing should be considered in the overall cost. There will be fees charged by the existing lender for paying out the loan early and there will be loan establishment fees with setting up the new loan. All that needs to be weighed up against any reduction in repayments achieved. You can also use our truck loans calculator for an approximation of the payments involved with your loan repayments.
The bottom line – if you currently have a truck loan, speak with your accountant about how your business may benefit from these changes. If you’re in the market for a new truck, now could be a good time to speak to Jade Truck Loans about a quote.
For a quote on truck finance, contact Jade Truck Loans on 1300 000 003
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