How Does Truck Financing Work?

The most common types of truck financing are commercial hire purchase, lease finance, and asset mortgage. When considering a truck loan, it’s important to compare interest rates, deposit requirements, residual balloon payment, and loan terms.

A good truck loan calculator will help you to compare different truck financing options and find the best one for your business.

The Different Types of Truck Financing

There are three most common types of truck financing: commercial hire purchase, lease finance, and asset mortgage. Here's a quick run down of the attributes of each:

Commercial Hire Purchase Truck Loans:

With commercial hire purchase, the business agrees to make regular payments to the lender over a set period of time, until the full purchase price of the truck is paid off. Once the truck is paid off, the business owns the truck outright.

Truck Lease Finance:

With lease finance, the business rents the truck from the lender for a set period of time, and at the end of the lease term, the business has the option to purchase the truck for a agreed-upon price.

Asset Mortgage Truck Finance:

With an asset mortgage, the truck is used as collateral for a loan. The business makes regular payments to the lender, and at the end of the loan term, the business owns the truck outright.

Each truck financing option comes with it's own tax considerations, so talking to a specialist truck loan finance broker is recommended in order to identify the best one for your business.

The Application Process for Truck Financing

Applying for truck financing is a relatively straightforward process. You can apply for truck financing from a variety of sources, including directly from banks, credit unions, and specialized truck financing companies. A specialist truck finance broker will help you find the best option.

When you apply for truck financing, you’ll need to provide the lender with information about your business, including financial statements, tax returns and, possibly, a business plan. You’ll also need to provide the lender with information about the truck you’re looking to finance, including the make, model, and year.

Once you’ve submitted your application, the lender will review your information and make a decision. If you’re approved for truck financing, the lender will provide you with a loan agreement that outlines the terms of the loan, including the interest rate, repayment schedule, and loan amount.

What You Need to Know Before Applying for Truck Financing

Before you apply for truck financing, there are a few things you should know.

First, you should have a good idea of the type of truck you’re looking to finance. You should have a clear idea of the make, model, and year of the truck, as well as the truck’s purchase price.

Second, you should have a good understanding of your business’s financial situation. You should have financial statements, tax returns, and a business plan ready to submit to the lender.

Third, you should estimate your monthly repayments & overall outlay based on various down payments and/or your trade-in value (if you plan to trade an exisiting vehicle), residual balloon payments, and loan terms. You can use a truck loan calculator to compare different truck financing options and find the best one for your business.

How to Get the Best Rate on Truck Financing

There are a few things you can do to get the best rate on truck financing.

First, you should have a good understanding of your business’s financial situation. You should have financial statements, tax returns, and a business plan ready to submit to the lender. Your prospects for a more favourable interest rate will improve when you have a convincing story to tell!

Second, you should talk to a specialist commercial vehicle finance broker. A specialist broker should be in a position to connect you immediately with the lender or lenders offering the lowest rates for your specific needs and circumstances. Brokers often have access to discounted rates and wholesale lenders, not accessable directly by the public. A broker will save a considerable amount of time and effort that you would otherwise spend yourself researching rates & options.

Third, you should be prepared to negotiate with the lender. You should have a clear idea of what you’re willing to pay, and you should be prepared to walk away if the lender isn’t willing to meet your needs.

To wrap things up

If you’re thinking about financing a truck for your business, we suggest that you:

1. Use our truck loan repayment calculator to compare various loan options and to establish your borrowing capactity.
2. Complete our free Truck Loan Eligibility Assessment to find out if you will qualify for the amount that you seek.
3. Talk to one of our specialist Truck Finance Brokers to walk you through the various rates & options and to arrange a loan pre-approval.

Share this article: