16 November

Reducing Truck Loan Repayments

Balancing business expenses in alignment with cash flow remains an enduring and pivotal endeavor for the majority of business operators. The persistent escalation of fuel prices and other cost increments continually exert pressure on the bottom line, thereby impacting profits and even influencing the remuneration of business owners. The lessons extracted from the pandemic, including the resounding reminder that unexpected events can transpire, underscore the paramount importance for businesses to remain well-versed in their financial status and maintain contingencies.

Mitigating truck loan repayments to a minimal or, at the very least, a manageable and sustainable level holds paramount significance in curtailing operational expenses. Whether you're in the throes of planning a new truck acquisition or you're harbouring reservations regarding your existing loan payments, the ensuing elucidation can furnish invaluable insights to guide you in steering your financial outflows to a lower threshold. Jade Truck Loans delineates the strategic pathways that businesses can contemplate, offering actionable strategies to structure their truck loans in pursuit of attaining a target truck loan repayment or alleviating the weight of existing truck loan repayments.

When looking at how lower loan repayments can be achieved, all components and factors of the loan can be considered.  The ‘components’ that are included in or impact a truck loan are primarily:

There are ways that each of these elements can varied to achieve a lower or target repayment level.

Type of Loan

One of the first decisions to be made when considering a truck loan is the type of loan. The choice of loan type will have an impact on the overall cost as the interest rates on the different finance products varies. While Chattel Mortgage for truck & trailer finance has the lowest interest rate, the features of this type of loan do not necessarily suit the set-up of all businesses. This loan type requires the truck to be listed on the business balance sheet and not all operators want to carry that liability/asset.

Truck leasing and Rent to Own attract higher interest rates but the benefits of improving the appearance of the balance sheet through the lender retaining ownership of the vehicle, may outweigh that extra cost. Review the features and benefits of each loan type against the business financial objectives.

Strategies to Tailor and Lower Repayments

There are strategies that can be implemented to achieve cheaper truck loan repayments.

Cheaper Interest Rates: This is somewhat of a no-brainer but it is an aspect often overlooked by truck buyers not taking as smart an approach as they could and should when sourcing their loan. While some lenders will offer very similar rates, in general, lenders’ rates do vary. So finding the cheapest rate is a crucial step to ensuring the repayments will be lower.

  • Lenders will set their rates based on their interest in financing a particular sector, consideration for the official cash rate set by the RBA and their costs of sourcing funds and running their business. There are non-bank lenders that specialise in heavy equipment finance which includes trucks and these can tend to be more flexible and negotiable than some major banks.
  • Accessing these specialist lenders is often only available through industry channels such as broker-style lenders like Jade Truck Loans.
  • Small variations in rates may seem inconsequential on the surface, but a quick comparison calculation and the true picture will quickly be realised. Use our interest rate comparison or truck loan calculator to see what we’re talking about.
  • Vary the interest rate by a small percentage and see how the repayments change. It’s that seemingly small difference, extrapolated out over the full say 7 years of a truck loan that really starts to add up. A small variation in the interest rate can add up to a big additional cost burden on the business.

Vary Loan Term: As interest is represented as a per year/per annum figure, the amount of time the funds are borrowed over will impact the total interest payable on the loan. Varying the term of the loan can reduce both the total interest payable and the monthly loan repayments.

  • As a simple rule of thumb: The longer the term the lower the monthly outgoing and the higher the total interest. The shorter the truck loan term the higher the loan repayment will be but overall, less interest in total can be payable. Use our Truck Loan Calculator to see exactly how changing the loan term changes the loan repayments.

Reduce Total Loan Amount: Jade Truck Loans offers no deposit finance (subject to lender approvals) which enables businesses to include the entire purchase price of truck or truck and trailer in the loan. Thus preserving cash funds for other purposes rather than a deposit.

  • However, if the overall objective is to achieve a lower truck loan repayment, then reducing the loan amount requested by paying an upfront may be the appropriate strategy. Once again, use the calculator to see how this may play out for your impending truck purchase.

Vary Balloon/Residual: Including a balloon/residual in a truck loan is an option which is widely and effectively used. Including a balloon amount will reduce the monthly loan repayments.

  • Lenders will have some say in what balloon amount they will approve. Business operators should also consider the predicted value of the vehicle at the end of the loan term to ensure the balloon would not exceed that value. That situation could leave the operator out of pocket after resale or trade-in.

Lender choice: As mentioned above, interest rates and other loan guidelines will vary across the lender market. So selecting the lender that offers both the cheapest interest rate and the flexibility in regard to loan terms and other aspects can be significant in achieving the target lower repayment level.

Jade Truck Loans is accredited with and has access to many lenders including specialist heavy equipment non-bank lenders.

Refinancing Existing Loan

If your cash flow is no longer working with your existing truck loan repayments, then it may be time to think about truck refinancing. Our consultants will discuss the options available to you and source a quote for your consideration.

Reducing truck loan repayments is a very achievable goal and one that our Jade consultants work towards reaching for our customers.

Contact Jade Truck Loans on 1300 000 003 to discuss reduced loan repayments for your next 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.

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