Best Truck Finance Options
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Truck finance & loans guide
Investing in a new heavy vehicle is a big deal for a business.
It’s also increasingly expensive (used truck prices in 2023 are 115% higher than they were pre-COVID)
In my experience, the businesses that get the best value from their investment are the ones who think as carefully about the truck finance as they do about the truck itself. Our truck loans guide can help you do just that.
What is truck finance?
Truck finance is a type of business loan used to finance a heavy vehicle purchase and spread the upfront costs over time. Some lenders refer to it as asset finance or equipment finance.
Here’s what's involved:
- Borrow up to $1 million to finance prime movers, 5Ts, flat beds, tray backs and more
- Available through banks, non-bank lenders, vehicle finance brokers and vehicle dealerships.
- To be eligible for truck finance, your business must meet several criteria, including having an ABN and being registered for GST.
- Your risk profile as a borrower, plus the vehicle’s type, age and weight will determine your truck loan interest rate.
What are my truck finance options?
There are several types of truck finance in Australia, including: A chattel mortgage, finance lease, and small business loans.
Most truck finance will be secured against the vehicle you purchase. This is cheaper for borrowers and less risky for lenders than unsecured finance.
I’ve summarised the most popular truck finance options below. If you want to compare these in more detail, you can also read my guide to the benefits of a chattel mortgage vs a lease vs hire purchase.
Chattel mortgage
With a chattel mortgage, the lender provides a loan to purchase the truck and the vehicle is used as security for the loan. You and the business will own the vehicle with full use of it.
Once you’ve purchased the truck you’ll need to make regular repayments on the loan — with interest — until it’s repaid in full.
Chattel mortgage interest rates are often lower than other types of business finance, making it a relatively cost-effective way to finance a truck.
Finance lease for a truck
The lender buys a truck of your choosing then leases it to you for a set period of time. You’ll make regular lease repayments and be able to use the truck until the lease period ends.
At that stage you can purchase the vehicle by paying your lender the remaining value, or upgrade the vehicle by taking out a new lease. Alternatively you can simply return the truck if you no longer need it.
Small business loan
Purchasing equipment is one of the most common reasons businesses apply for a small business loan, according to recent lender data.
With a small business loan you can usually get fast approval and loan limits of $250,000+. Some small business loans do not require assets as security, making it a potential option if the truck you are looking to finance is not eligible to be used as collateral on a loan.
While a small business loan may be a simple and fast option, it will likely be more expensive than other alternatives, with higher interest rates and fees charged.
Compare truck finance pros and cons
| Loan type | Term | Pros | Cons |
|---|---|---|---|
Chattel mortgage | 1-5 years | You own the vehicle from the outset | The lender may repossess the truck if you can't make repayments |
Finance lease | 1-5 years | Low up-front costs | Residual payment may be required to own the truck at end of lease |
Small business loan | 1 month to 2+ years | Fast, easy approval | High interest rates and fees compared to secured truck finance |
How to get the best interest rates on truck finance
Interest rates on truck finance will differ based on several factors including:
- The type, age and weight of the vehicle you’re purchasing
- How risky lenders perceive you to be as a borrower.
I've explained these factors in more detail below.
Vehicle type, use and weight
Generally speaking, loans for trucks or other heavy commercial vehicles tend to attract higher interest rates than light vehicle loans. Especially if the truck has a specialised or niche use.
That’s because lenders may find it more difficult to sell specialist vehicles (compared to a passenger vehicle, for example) and recoup their losses if the borrower can’t repay the loan.
The truck’s age
Loans to purchase brand-new vehicles usually have the lowest rates, with higher interest rates for used vehicles under five years of age, and higher rates again for used vehicles over five years of age.
Your risk profile as a borrower
The truck finance provider will weigh up a number of factors to assess your risk as a borrower. That might include:
- How long your business has been trading
- How profitable your business is
- Your business cash flow
- Your business assets and liabilities
- What documentation you’re able to provide (low doc business loans may attract a higher rate)
If your lender identifies you as a high-risk borrower, they may charge you higher rates to cover themselves against that risk.
Best truck loan rate comparison
| Truck finance amount | 6% interest | 8% interest | 10% interest |
|---|---|---|---|
$50,000 | $967 | $1,014 | $1,062 |
$75,000 | $1,450 | $1,521 | $1,594 |
$100,000 | $1,933 | $2,028 | $2,125 |
$150,000 | $2,900 | $3,041 | $3,187 |
$200,000 | $3,867 | $4,055 | $4,249 |
How to get the cheapest deal for truck finance
In my experience, these are the factors that can save businesses the most money on the cost of their truck finance:
1. Look for low truck finance fees
Truck finance fees can vary massively depending on the lender. Here are the main fees you should try to minimise:
- Establishment fees
- Monthly account keeping fees
- Extra repayment fees
- Early loan termination fees
2. Compare the best rates
Even if you have an existing relationship with a lender, for a big asset for your business like a truck, it is worth seeking finance quotes from as many lenders as you can.
But rather than enquiring with lenders individually (which will be time consuming and could impact your credit score) we can check multiple lender rates on your behalf to find you a loan that suits, with no credit score impact.
3. Look for a short finance term
And ideally the flexibility to make it even shorter by making extra repayments.
When it comes to calculating the cost of your truck loan, the length of the term will make a big difference.
Getting the shortest term you can (while keeping your repayments affordable) could cut your costs substantially. It also helps if you have the flexibility to pay off the truck loan sooner (without penalty) if you have available cash flow.
Who is eligible for truck finance?
These are the main eligibility criteria for most truck finance options:
- Your must be an Australian citizen or permanent resident
- Your business must have an ABN (there are specialist vehicle loans for ABN holders)
- Your business must be registered for GST
- With some lenders, your business must have been operating for at least two years (newer businesses can apply but may need to supply proof of work contracts in place and may be charged higher interest rates)
- Your business must meet the lender’s minimum credit score requirements (otherwise you may need to look for a bad credit truck loan)
- Your business must meet the lender’s minimum annual turnover requirements (usually $75,000 to $100,000)
- Your business must have less than the lender’s maximum level of existing borrowings (usually $1 million)
- You need to be able to prove to your lender that your business can service the debt and/or afford the lease payments.
- You must intend to use the vehicle for mainly business purposes
How to apply for truck finance
Here are the main steps to getting your truck finance set up:
- Compare your truck finance options
- Apply online with your lender of choice
- Provide supporting documents showing your business’ financials
- Wait for approval
Documents required for a truck finance application
To verify details about your business and prove that you can afford the loan, you may have to provide certain documents during the application process for your truck finance, such as:
- Business bank statements
- Business activity statements
- Balance sheets including details of your business’s profits, losses, assets and liabilities
- ATO tax returns for the last two years
If you’re unable to provide the documentation your lender requires, you may be able to apply for a low documentation business loan and use alternate documentation such as financial statements prepared by your accountant.
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Other common questions about truck loans
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Do I need a deposit to get truck finance?
Most lenders will lend 100% of the value of heavy vehicles and do not require a deposit. However, if you’re deemed to be a high-risk borrower or your business has been in operation for less than two years you may need to pay a deposit of 30% of the truck’s value.
What are the tax benefits of truck finance?
Buying a heavy vehicle with truck finance may have a number of tax benefits for your business. For example, you may be able to claim interest payments, depreciation and loan fees to reduce your business’s taxable income. It’s a good idea to speak to your accountant before applying for truck finance to make sure you’re maximising tax efficiencies.
Can I apply for truck finance if I’ve just started my business?
Yes, you can with certain lenders. However, you may be charged higher interest rates and you may need to provide contracts showing what work you have lined up. Other lenders only offer truck loans to more established businesses.
How long does it take to be approved for truck finance?
Some lenders offer approval for truck finance as little as 24 hours after you apply. But in most cases, it’ll take three to five business days.
Written by
Loans Expert
Shaun McGowan
Reviewed by
Editor
Sean Callery
