Things to consider before applying for truck finance
Investing in a new truck or heavy equipment is a big decision that requires careful planning, consultation, and research – especially when it comes to securing the right type of loan.
Making the wrong choice can have financial repercussions for your business, impact future contracts and even hurt employee satisfaction.
Here are four things to consider before applying for truck finance:
Do you need the equipment?
The first and most fundamental question to ask is whether you genuinely need the equipment or vehicle you plan to buy. Often, businesses invest in new equipment or technology that doesn’t align with their actual needs.
Determine if you have sufficient work lined up for the equipment. In other words, will the income generated, or time saved by purchasing the additional equipment, outweigh the costs of repaying and maintaining it? It’s also important to confirm whether the equipment is the right age and type for your intended use.
Are you purchasing the right equipment?
In the business world, contracts and agreements are a common occurrence. When dealing with heavy vehicles and equipment, contracts often include specific requirements regarding the age and type of vehicles allowed on job sites. Before investing in a new truck or equipment, make sure you understand the fleet requirements of your major clients and any potential future partners.
Additionally, consider whether the equipment is suited for the job. Factors such as horsepower, size, body type, safety specifications, among others, should align with the tasks required. Assessing the compatibility of your prospective purchase with both current and potential clients can save you a great deal of trouble in the long run.
Do you have good credit?
An important factor in securing truck finance is your credit history. Without a good credit score, obtaining finance can either be costly or nearly impossible It can be worth getting advice from a knowledgeable finance broker, as they can make sure you are well-placed to obtain finance and compare your options.
Obtaining a copy of your credit file allows experts to evaluate your financial eligibility. You can also address any credit issues early on which may improve your chances of securing truck finance.
What sort of loan is right for your needs?
Selecting the right type of finance is often just as important as choosing the right truck or equipment. To determine the best loan type, consider whether you intend to own your new acquisition outright at the end of the loan or if you prefer a balloon payment structure.
Factors that impact this decision include the length of time you plan to keep the vehicle (or equipment) and your desired cash flow structure. Long-term loans with balloon payments may be suitable for those intending to retain their assets for an extended period, while shorter loans with higher monthly repayments could be more appropriate for short-term equipment purchases.