Truck loans explained: Types, eligibility, and more

If you’re in the market for a new truck, you might be considering financing. You might also have a few questions about how truck loans work, in which case you’ve come to the right place. Read as we do a deep dive into truck finance options, including who may be eligible, how repayments work, and how to apply.

What is truck finance and am I eligible for it?

Commercial truck loans are designed to fund vehicles needed for business use, and depending on your preferences, there are a few types to choose from, but we'll get to that in a bit. Truck loans fall under equipment financing, a subset of business finance used for funding equipment, including vehicles, yellow goods, and machinery.

Our lending experts can help you determine the best type of truck financing for your needs. We can also confirm your eligibility without the need for a formal credit application by carrying out a soft check (which won’t affect your credit score whatsoever).

Eligibility for truck financing depends on your credit history, financial health, and time trading, as well as the strength of your business. These factors will also determine your rate when you are approved. Keep in mind these are just a few of the factors considered, and each lender will have their own set of approval criteria.

How much are truck finance repayments?

Dipping into savings or cash flow is a risky move and should only be considered in emergencies. Truck finance allows you to purchase and use the vehicle you need right away without having to sacrifice your business’ security.

Repayments vary depending on your lender and situation, but generally, you can expect your truck loan rate to sit somewhere between 5% and 30%.

After taking out truck finance, many business owners find that the returns make up for their initial investment. But if you’re still unsure, we can crunch the numbers and help you figure out if truck finance is worthwhile in your specific situation. Simply chat with one of our experts on 1300 780 568.

Types of truck finance

There are three main types of truck finance to choose from. They are:

Hire-purchase agreement

With a hire-purchase agreement, you’ll pay instalments to ‘borrow’ a commercial truck from your lender, and once you’ve paid it off, your lender will transfer ownership of the truck to you.

Hire-purchase agreements are typically flexible—for example, some lenders will let you put down a deposit to lower interest rates, while others might let you return the truck during your repayment term if it’s no longer needed.

Chattel mortgage

With a chattel mortgage, you can purchase any eligible truck with borrowed funds from your lender and then repay those funds with interest. Your truck will double up as collateral (or security) for your loan, meaning you won’t have to put existing assets on the line.

No down payment is necessary either—you can often borrow up to 100% of your truck’s value. If you become unable to meet your repayments, though, your lender might be able to sell your truck to recoup losses incurred. But rest assured, lenders see this option as a last resort.

For your truck to be considered an ‘eligible asset,’ it’ll need to be used for business purposes at least 50% of the time.

Equipment lease

An equipment lease lets you borrow commercial vehicles and pay a monthly instalment over an agreed period of time to use them. Your lender will technically own the asset, but you can use it for business needs. At the end of your equipment lease, you might have the option of purchasing the vehicle (meaning ownership will be transferred from your lender to you) or upgrading it and taking out a new lease.

Documents to have on hand when applying for truck finance

When you’re ready to apply for truck finance, it’s worth having a few documents on hand to ensure your application runs as smoothly as possible. While required documentation will vary from lender to lender, generally you can expect to be asked for the following:

• Identification (driver's license or passport)
• Proof of income (in the form of recent pay slips and bank statements from the past 3 months)
• Proof of your current assets and liabilities
• Information about the truck you’d like to purchase (including make, model, and registration information, if you have it)

What to consider before getting a truck loan

Before jumping into a truck loan, you should weigh up your financial situation and ensure you're ready for this commitment, taking into account:

Loan terms

Whatever type of financing we're talking about, you never want to sign the loan agreement before carefully reviewing the terms. Particularly, make sure to check the:

• Interest rate—not only the rate itself, but whether it is fixed (giving you more predictable payments) or variable (riskier, if rates increase).
• Loan term, meaning how long you have to repay the loan. A longer term means lower monthly repayments but more interest overall, while a shorter term means higher repayments but less interest.
• Down payment, specifically what percentage the lender expects to receive.

Additional costs

At this point, you're likely focusing on the cost of your potential loan, but it's important to remember that several ongoing expenses come with owning a truck. Things like maintenance, unexpected repairs, fuel, insurance, and even parking can easily add up—so make sure you can handle the full cost of ownership, and not just the loan.

Finding the right truck loan for your business

The right truck finance solution for you depends on your preferences and financial situation. If you value flexibility or plan on using your truck temporarily, a hire-purchase agreement may suit your needs best. If you don’t have security or cash upfront, you might like to consider a chattel mortgage.

We also have options for those who need truck financing quickly, and can get you approved in as little as 24 hours. With hundreds of products to choose from, searching for the right loan and lender is a time-consuming task. That’s what our experts are here for.

We can help you navigate the truck finance market and ultimately find a loan that gets you on the road quickly and affordably. Call us on 1300 780 568 or fill out this two minute form to get started with your free, no-obligation truck finance quotes.