Truck & Trailer Loans

What is a truck loan?

Financing for large assets, such as a truck, trailer, or other large commercial vehicle is usually in the form of a secured loan. With this kind of loan, the asset being purchased (in this case, a truck), is used as a security or collateral for the loan, meaning that if you default on the loan, the lender can repossess the vehicle. That said, it is possible to take out an unsecured loan to finance the purchase of a truck or trailer – it just depends on what makes sense for your business.

Secured loans typically attract a lower interest rate because they’re deemed less risky from a lender’s perspective. Additionally, a secured truck loan, such as a chattel mortgage, can also come with potential tax benefits.

What kinds of business loans are available for purchasing trucks and trailers?

• Chattel mortgage: With this loan product the truck or trailer being purchased would typically be used as security for the loan. This means that if you fail to make repayments and default on your loan, the lender could repossess the asset. Chattel mortgages tend to be a popular option for vehicle finance, with one of the main benefits being that you assume ‘ownership’ of the asset as you pay it off, opening up potential tax benefits*.
• Hire-purchase agreement: Hire-purchase agreements can provide more flexibility, allowing you to use the truck or trailer as you pay it off, and the ability to return the asset during the ‘hire’ period if you no longer need or require it. Once the final loan payment is made, ownership of the vehicle is transferred to you.
• Lease agreement: Similar to hire-purchase agreements, with a lease agreement you don’t technically own the asset as you pay it off, but rather you lease it from the lender, similar to renting a property. Additionally, at the end of the lease period you won’t own the asset. Instead, you’ll have the option to extend the lease, purchase the truck or trailer at a reduced rate, or simply end the agreement and return the asset.

Can a truck loan come with tax potential tax benefits?

Chattel mortgages are commonly used for vehicle financing because they can offer potential tax benefits through depreciation and other deductions. This is because you’re considered the ‘owner’ of the vehicle, even as repay the lender. The same typically goes for any other equipment purchased with a chattel mortgage.

That said, a hire-purchase agreement, or even a lease agreement, could also provide tax benefits. The best thing to do is speak to a qualified tax advisor to get a clearer view of any tax implications before making a decision.¹The information in this content is general in nature and should not be considered tax advice. You should always seek professional tax advice or assistance before acting or relying on any content.

What are some things to consider when comparing truck finance options?

Regardless of how much you’re planning to borrow, here’s a range of factors worth considering as you compare business loan products and search for a good deal.

• Interest rate: Interest rates can vary between lenders, so it can pay to compare rates on offer, and see if you can find a good deal.
• Loan term: Loan terms refer to the contracted length of the loan (eg: three years, or five years). It’s a good idea to select a loan term that isn’t going to cause unnecessary stress when it comes to managing repayments.
• Loan amount: Depending on your business’ financial situation, you may only need to borrow a certain percentage of the asset’s value in order to purchase it. The team at Valiant can help guide you through this process.
• Fixed or variable: Fixed interest rates can provide the certainty of knowing exactly what your repayments will be, helping you to forecast accordingly with your business’ cashflow. On the other hand, variable interest rates could allow you to save if rates drop.
• Fees: Setup and ongoing maintenance fees can vary between lenders, so it’s important to compare these as well and avoid any nasty surprises down the track.
• Redraw facility: Some secured loans can include a redraw facility. This allows you to withdraw any money from any additional payments you’ve made on top of your minimum repayments. Using this feature could lower the lifetime cost of your loan.
• Repayment schedule: Some lenders offer the flexibility of weekly, fortnightly, and monthly repayments, so it’s a good idea to find an option that aligns with your business’ cashflow.

What factors could affect your eligibility?

The eligibility criteria offered by lenders can vary widely, which is why it pays to speak to the team at Valiant who are experienced in submitting loan applications on behalf of Aussie businesses.

That said, here are some additional factors which can affect your loan eligibility:

• Your credit rating
• Your trading history and how long your business has been in operation
• Whether or not you’ve defaulted on a loan or experienced a bankruptcy in the past
• The percentage of business vs personal use of the asset or vehicle
• Whether or not you’re eligible to work in Australia

Compare truck loans with iSelect and Valiant*

Ready to find a finance option that for your new truck or trailer? At iSelect we’ve partnered with Valiant to make it easier for iSelect customers to find a loan product that suits their business. Not only can Valiant help you compare finance options to find a solution that works for you, but they’ll also manage the application process with lenders, giving you time to work on your business.  Click here to get started today!

Last updated: 09/04/2021