Truck Finance
INTRODUCTION:
Heavy equipment financing is one of the costliest expenditures of a company. Yet, it is most necessary for its functioning.
For most industries, transportation cost gobbles up more than half of their profits.
Hence, companies are opting for truck finance.
A truck is considered equipment that serves several purposes for a business. Hence, it is heavy equipment financing or commercial vehicle financing.
WHICH INDUSTRIES NEED TRUCK FINANCE?
More or less every industry needs transportation services. For heavy industries, transportation is done in bulk. Raw materials are imported and or exported. Hence, the vehicles have to traverse great distances.
For such long journeys and for carrying such heavy loads, trucks are preferred.
The following industries mostly choose truck finance:
- Manufacturing industries
- Packers and movers
- Cargo industries
- Logistics company
- Construction firms
WHICH TRUCKS CAN BE FINANCED?
Most heavyweight trucks can be financed, for example:
- Cement trucks
- Reefers
- Car carriers
- Cane trucks
- Fire trucks
- Tow trucks
- Pickup truck
- Boat haulage
- Australian road train
- Tankers
- Livestock truck, etc.
CAN I GET A TRUCK ON FINANCE?
If you are a business owner with proper credentials, you can get a truck on finance.
If you are about to start a new business or own a start-up, then also you can get a truck on finance.
For new businesses or start-ups, or SMEs, the terms may be a little stringent. You may have to deposit security for the finance. But it will not disqualify you from getting truck finance.
HOW DOES FINANCING A TRUCK WORK?
Financing a truck works in several ways.
You may need a truck for a couple of months or years. In that case, you can just hire it.
For construction businesses or for packers and movers, you will need a truck for all your projects. In that case, buy the truck.
Financing a truck works in two ways:
- Leasing
- Commercial vehicle loan
1. TRUCK LEASE:
You use the truck for as much time as you need. Then, you may either buy it or return it. You can even extend the lease tenure.
There are three types of truck leases currently available.
a) Chattel Mortgage –
This is very much like taking a loan, with some minor differences. You own the vehicle. You can use it as per your wish. There is no restriction regarding the usage of the truck.
You have to make the full cost repayment by making a balloon payment at the end. Along with this, you have the obligation of making monthly payments.
Why you can endorse it:
∙ The interest rate is slightly less. This is because your security deposit is your truck. So, the lender’s risk percentage is less.
∙ You legally own it and can build equity on it.
Risks associated with it:
∙ The truck you buy is the loan collateral. So, you can lose it if the payments are not made in time.
∙ A lumpsum balloon amount awaits you when the term ends.
b) Finance Lease –
You borrow a car for a decided tenure. Then pay for it monthly. You can use the truck for your business purpose. But you don’t technically “own” the truck.
At the end of the term, you can simply return the truck to the lessor. If you like the truck, you also have the option to buy it. There are third and fourth options for you too. The third option – extend the lease. The fourth option – refinance the residual. And then you can enter into a new lease agreement either with the same lessor, or another. You can also choose another truck for use.
Why you can endorse it:
∙ Flexibility is the real deal for this lease. You have multiple options at the end. Also, you can act according to your contemporary situation. You are under no obligation to buy or renew the lease.
∙ Lower monthly payments
Risks associated with it:
- Use the truck well. Any damage to parts or paint means a huge fine.
- You are restricted to a mileage of 12,000 miles per hour.
- You are responsible for its regular maintenance and servicing. Hence, costs rise.
c) Operational Lease –
Simply put, it is hiring a truck for your business purpose. Pay monthly for the lease. And use the truck as and when you need it during that tenure.
Why you can endorse it:
- The lessor is responsible for servicing and maintaining the truck.
- You get free upgrades during the lease term.
- You are not tied up with a depreciating asset.
Risks associated with it:
- Be very careful with handling it. Any major mutilation and you’re in for a heavy penalty.
- You cannot decorate the truck or modify any parts.
- High EMIs due to the inclusion of maintenance costs.
2. COMMERCIAL VEHICLE LOAN:
Very much like a traditional loan, you pay interest on the principal amount.
There are 2 subdivisions.
a) Commercial Hire Purchase –
This works very much like a lease. You make monthly payments. At the end of the agreement period, you make a balloon payment. Only after that are you the registered truck owner.
Why you can endorse it:
∙ No need to make a down payment.
Risks associated with it:
∙ You cannot have equity shares until the end of the contract.
∙ You are bound to buy the truck.
b) Truck loan –
Take a loan to buy the truck. Pay for it as per the repayment schedule. The payment terms and amount are negotiated before the loan is approved.
Why you can endorse it:
- This is a secured loan.
- You gain ownership of the truck.
- No usage or mileage restrictions.
- Adjust the duration and terms of payment at your convenience.
Risks associated with it:
∙ Your truck is secured against the loan. Any deviation from the monetary terms can cost you. Your truck may be liquidated by the moneylender to retrieve the costs.
∙ You own a depreciating asset.
HOW HARD IS IT TO GET A LOAN FOR A TRUCK?
With Finance Brokers Victoria, it is very simple!
Forget the burden of mass paperwork.
We chalk out different finance options for you based on your requirement. Taking into consideration your financial stability, we present to you various repayment terms.
Our connection with more than 40 lenders helps us provide the best finance deals for you.
Take the guidance of the most qualified professionals in this field.