Amidst the surging and anticipated increase in inflation, leading to widespread cost escalation, businesses must remain vigilant in managing their expenditures. Mitigating costs wherever feasible can have a positive impact on overall profitability. When venturing into new vehicle acquisitions, the journey begins by exploring avenues to minimize the expenses associated with truck loans.
In the current climate of rising interest rates there are actions and strategies which operators can use to reduce the cost of a new or existing truck loan. Reducing the cost of a loan may be defined as a real or relative saving or a reduction that eases pressure on the business cash flow and ultimately delivers a better bottom line.
What Can Be Targeted
There are a number of strategies which can be employed depending on the objectives of the business, the structure of the operation, the vehicle being acquired and the type of loan.
Typical issues which can be targeted and which we will detail here include:-
- Reducing the rate of interest applicable
- Reducing the total amount of interest on the loan
- Reducing the monthly truck loan repayments
- Reducing the tax obligations
- Refinance existing loans
Of course the total amount of the loan will determine the monthly repayments and the total amount of interest which is payable on the loan. So in general, reducing the loan amount can achieve a number of goals. This may be achieved by opting for a less expensive vehicle or foregoing no deposit finance.
Achieving a Lower Interest Rate
It’s no secret that interest rates are on the rise. In response to the economic effects of the pandemic, the RBA slashed the cash rate in 2020 to the historic low of 0.1%. This was held through 2021 and early 2022. Loans across all lending sector were extremely attractive through this period.
But the economy rebounded faster than anticipated, inflation surged and in May the RBA acted with its first rate rise in 12 years. Another rise followed in June and Governor Lowe has clearly indicated that additional rises will be required in the months ahead.
As the interest rate is a major contributor to the cost of a truck loan, securing the cheapest possibly interest rate is the aim of most operators.
To achieve a lower truck interest rate, operators can consider addressing their credit rating. Assessment of the business credit rating is a key part of the loan approval process. Businesses with a good credit rating will typically be offered better interest rates.
Businesses can also more closely consider which bank or non-bank lender to apply to. Lending rates do vary across the market. A quick solution to sourcing the cheapest rate on the market at that time is to engage the services of a finance broker style lender such as Jade Truck Loans.
Our vast accreditations allow us to quickly and easily identify which lender is offering the best rates and will best suit our customer. That lender may be a specialist non-bank lender that only operates through their selected brokers. So we can open up these exclusive channels to lower interest rate truck loans.
Reducing Total Interest Cost
The overall total interest which is payable on the truck loan may be reduced by considering the loan term. While a longer loan term will reduce the monthly repayment it results in more interest payable compared with a shorter loan term.
A shorter loan term delivers a higher monthly loan repayment but less interest payable. So short term pain for long term gain.
Following on from above and reiterating those points, varying the loan term can reduce the repayment amount as will a lower loan amount. To see how that works, simply use our Truck Finance Calculator and vary the data to see how the repayment amount changes.
In regard to no deposit finance, that can be a no-brainer in times of record low interest rates. But when rates start to edge upwards, it could be timely to think twice in that regard. Paying a deposit to the truck dealer and reducing the amount of the loan can ultimately reduce many aspects of the loan.
Reducing Tax Obligations
The type of loan product used can be an effective means of reducing tax obligations or more specifically, maximising tax deductions. Currently, very attractive tax deductions are available for eligible businesses acquiring eligible assets through Instant Asset Write-Off and temporary full expensing.
To be in a position to utilise these temporary tax measures, Chattel Mortgage Truck Finance is considered the most suitable form of finance.
Refinancing Existing Truck Loans
With cost increases putting pressure on cash flow, refinancing existing truck loans may be a suitable strategy for easing that pressure. Operators can discuss with us how we may be able to refinance existing loans to vary the loan term or interest rate to achieve a reduced monthly loan repayment.
Leveraging our services can prove highly effective in aiding operators to realize reductions in various facets of truck finance. Our skilled consultants engage in detailed discussions to identify the strategies that align with your goals, implementing the required actions to secure cheaper rates, lower total interest, or reduced loan repayments on your behalf.
Contact Jade Truck Loans on 1300 000 003 to discuss how we can assist you to reduce your truck loan costs.
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.