Truck loan refinancing allows an Australian business to replace its existing commercial truck finance with a new facility.
For an owner-operator or transport business, refinancing may be worth considering when the current repayment no longer suits cash flow, the business has become stronger since the original loan was arranged, or a different finance structure could better match how long the truck will remain in the fleet.
Refinancing can potentially lower loan repayments through a more suitable interest rate, a longer finance term, a different balloon payment or a combination of these.
But a lower monthly repayment does not automatically mean the new finance is cheaper.
A proper comparison should consider the existing loan payout, early exit costs, new lender fees, remaining finance term, proposed term, balloon payment, total estimated finance cost and the current value of the truck.
The Asset Finance Shop (TAFS) can assess existing commercial truck finance and compare refinance options through access to more than 80 bank and non-bank lenders.
This guide explains how truck loan refinancing works in Australia, when it can reduce repayments, what lenders assess, what to do after a previous bank decline and how businesses can improve their refinance options before applying.
Truck loan refinancing means replacing your current commercial truck loan with a new finance facility.
The new lender pays out the amount owing to the existing lender.
The current lender then releases its security over the truck and the new lender registers its own security.
From that point, the business makes repayments under the new finance agreement.
The truck does not necessarily change.
The finance attached to it does.
A business may consider refinancing because it wants to:
The refinance should have a clear commercial benefit.
Yes.
Truck loan refinancing can potentially reduce regular repayments.
There are three main ways this can happen:
Sometimes a refinance uses a combination of these.
For example, imagine an owner-operator has:
Current payout: $140,000
Remaining term: 3 years
Refinancing the $140,000 over a new five-year term would generally reduce the regular repayment because the outstanding balance is being spread across a longer period.
The trade-off is that the debt remains outstanding for longer.
That is why the new repayment should never be compared on its own.
The business may qualify for a different interest rate from the one available when the original truck finance was arranged.
This can happen because the business is now in a stronger position.
For example, the business may now have:
Consider an owner-driver who financed their first prime mover when the business was relatively new.
Three years later, they may have:
ABN history: 3 additional years
Truck repayment history: Clean
Customer base: More established
Business income: Stronger
Contracts: More consistent
That business may now qualify differently from when the original loan was arranged.
A lower interest rate is not guaranteed.
The rate available will depend on the lender, business, truck and complete application.
Extending the term can reduce the regular repayment.
For example:
Existing payout: $160,000
Current remaining term: 3 years
Proposed refinance term: 5 years
The same outstanding balance is now being repaid across more months.
The monthly commitment will generally fall.
This can be useful where the business wants more working capital available each month.
However, the business may pay interest for longer.
The decision should therefore compare:
Lower monthly payment
against:
Longer time in debt and total finance cost
A balloon is an agreed amount that remains outstanding at the end of the finance term.
Including a balloon generally lowers regular repayments because less principal is repaid during the term.
For example:
Amount financed: $150,000
Term: 5 years
A facility with no balloon will generally have a higher repayment than the same amount financed with a $30,000 balloon.
The trade-off is that $30,000 remains payable at the end.
For a commercial truck refinance, the balloon should consider:
The aim should not simply be the lowest possible repayment.
No.
This is one of the most important things to understand about truck loan refinancing.
A refinance can lower monthly repayments while increasing the amount paid over the complete finance term.
Suppose your existing loan has three years remaining.
You refinance the balance over five years.
Your monthly repayment may fall substantially.
That can improve cash flow.
But the business is now paying finance costs over another five years rather than three.
That does not automatically make the refinance a poor decision.
It means the purpose of the refinance needs to be clear.
A business may want to:
Reduce monthly repayments
or:
Reduce the total finance cost
These are not always the same objective.
A longer term may be effective for the first goal but work against the second.
The refinance should be structured around what the business actually needs.
Transport businesses have significant operating costs.
These can include:
Reducing a truck repayment can leave more cash available for these expenses.
For example:
Monthly repayment reduction: $750
Over 12 months, that leaves:
$9,000
of additional cash flow inside the business.
If the repayment reduction is:
$1,200 per month
the annual cash flow difference becomes:
$14,400
Whether that benefit justifies refinancing depends on what it costs to achieve it.
Start with a side-by-side comparison.
|
Current Truck Finance |
Proposed Refinance |
|
Current payout |
New amount financed |
|
Current interest rate |
Proposed interest rate |
|
Current repayment |
Proposed repayment |
|
Remaining term |
New term |
|
Existing balloon |
Proposed balloon |
|
Exit costs |
New lender fees |
|
Current truck value |
Expected future truck value |
|
Remaining finance cost |
Proposed finance cost |
Then ask what is actually improving.
Is the new finance:
You should be able to explain the benefit in clear terms before proceeding.
The truck loan payout is the amount required to completely close the existing finance facility on a particular date.
It may include:
The payout is not always identical to the balance displayed on an online account.
Before comparing refinance options, obtain an accurate payout figure.
Imagine the online balance appears to be:
$100,000
but the formal payout is:
$103,500
The new finance may need to cover $103,500 rather than $100,000.
That difference affects:
Potentially.
The current lender may charge costs when the existing finance is paid out early.
These can vary depending on the agreement.
Before refinancing, identify:
These costs should be included in the comparison.
A lower interest rate may provide limited benefit if the existing loan is expensive to exit.
The interest rate matters, but it is only one part of a commercial vehicle refinance.
For example:
Lower rate
Longer term
Larger balloon
Slightly higher rate
Shorter term
Smaller balloon
Option A may have the lower monthly repayment.
Option B may have the lower overall finance cost.
The better option depends on what the business is trying to achieve.
Compare the dollar outcome, not simply the advertised percentage rate.
Potentially.
A bank decline does not automatically mean another commercial truck lender will reach the same decision.
Different lenders have different requirements around:
However, the next step should not simply be making another application somewhere else.
First understand why the previous application was declined.
Start by identifying the issue.
Possible reasons could include:
Once the reason is understood, the application can be reassessed.
For example, if the previous lender declined because the truck was outside its vehicle age policy, another lender may have different asset criteria.
If the decline was caused by insufficient repayment capacity, simply applying elsewhere without changing anything may produce the same result.
A new lender may consider:
The previous decline is only one part of the application.
The lender still needs to independently assess the complete transaction.
TAFS does not use that approach.
Making several formal applications does not necessarily improve the underlying finance position.
Instead, the application can first be reviewed to understand:
TAFS starts with a soft credit check and internal assessment before one formal application is submitted to the selected lender.
Truck loan refinancing is a new commercial finance application.
The lender assesses both the business and the truck.
The lender may consider:
A longer trading history can provide more information about the business than was available when the original truck was financed.
The lender needs to understand whether the proposed repayment can be supported.
Depending on the application, income may be assessed using:
Your current truck loan can provide useful evidence.
A clean repayment history shows that the business has already managed a commercial vehicle finance commitment.
The lender may review:
The lender may consider:
Different lenders use different credit policies.
The truck itself remains part of the refinance assessment.
The lender may consider:
The lender compares the amount owing with the value of the truck.
A truck worth significantly more than the current payout presents differently from one where the loan balance exceeds the truck's approximate market value.
Truck equity is broadly the difference between the vehicle's value and the amount required to pay out the finance.
For example:
Estimated truck value: $190,000
Current payout: $125,000
Approximate equity:
$65,000
Compare that with:
Truck value: $120,000
Current payout: $145,000
The second example has more finance owing than the approximate vehicle value.
That can reduce the available refinance options.
Potentially.
Where a business has substantial equity in a truck, selected lenders may consider releasing some of that equity for an eligible business purpose.
For example:
Truck value: $220,000
Existing payout: $130,000
Approximate equity:
$90,000
A lender may potentially consider a refinance above the existing payout where there is an acceptable business purpose and the full application supports it.
This is different from refinancing purely to reduce repayments.
Equity release increases the amount borrowed and should be considered separately.
Yes.
Owner-operators and sole traders can apply for truck loan refinancing.
The lender may assess:
For an established owner-driver, several years of good conduct on the existing truck finance can strengthen the overall application.
Yes.
Selected lenders can refinance used commercial vehicles.
Available options may depend on:
An older truck may support a shorter refinance term than a newer vehicle.
The lender generally wants the finance term to make sense relative to the remaining working life of the asset.
Potentially.
Age alone does not automatically prevent refinancing.
The lender may look at:
A ten-year-old truck with strong value and good condition may present differently from another truck of the same age with very high kilometres and limited remaining value.
Yes.
Chattel mortgage is the main truck finance structure TAFS arranges.
Under a refinance:
The business continues to own the truck.
Yes.
An existing balloon becomes part of the finance payout.
The new loan may also include a balloon, subject to lender criteria.
The replacement balloon should consider the truck's:
A balloon that made sense when the truck was new may not be suitable several years later.
Potentially.
Selected lenders can consider low doc commercial vehicle refinance applications.
Instead of complete financial statements, the lender may use information such as:
Low doc does not mean no assessment.
The lender still needs enough information to understand whether the proposed repayment can be supported.
Potentially.
Selected lenders may consider applications where the business has ATO debt.
The lender may assess:
The overall finance still needs to make sense.
Potentially.
Different lenders can have different credit criteria.
The available refinance options may depend on:
Previous credit problems can affect pricing and lender options, but should be assessed as part of the complete application.
There are several practical steps a business can take before applying.
Do not rely on an approximate online balance.
Ask the existing lender for a formal or current payout figure.
Have the following information available:
Without those figures, it is difficult to establish whether a refinance is actually better.
Bank statements can help demonstrate current trading activity and cash flow.
A clean truck repayment record can support the refinance application.
If there have been late repayments, understand why before applying.
Truck value affects the relationship between the asset and the finance payout.
Have realistic expectations rather than relying on the original purchase price.
If the business is stronger than when the current loan was arranged, make that clear.
For example:
Tell your broker whether the priority is:
The right structure depends on the objective.
Review the application and lender fit first.
Several formal applications do not automatically increase the likelihood of approval.
Requirements depend on the lender and transaction.
For an initial assessment, useful information can include:
Later in the process, the lender may also request:
Preparing the information early can reduce delays.
There is no single minimum period that applies across every commercial truck lender.
A lender may consider:
Refinancing very early can sometimes provide limited benefit where the existing facility carries substantial payout costs.
The refinance should have a genuine commercial purpose.
Refinancing can be worth considering when:
Keeping the existing loan may be stronger where:
The correct outcome is not always refinancing.
Sometimes the best comparison confirms that the existing loan should remain in place.
This becomes particularly important with an ageing commercial vehicle.
Consider:
Imagine an older truck has three years left on its current finance.
Refinancing it over another five years might create an attractive monthly repayment.
But if the truck is likely to need replacing in two years, the business may still have a significant payout when it is time to trade.
In that situation, comparing replacement finance at the same time may provide a clearer picture.
Potentially.
A transport business planning to expand may first review its existing finance commitments.
Reducing a current repayment may improve monthly cash flow before another truck is added.
However, the lender assessing the next truck will still look at:
The refinance and fleet expansion should work together.
Potentially.
A transport business may have several separate commercial vehicle facilities.
For example:
A refinance review can consider the broader fleet position.
The lender may assess:
The objective should be to create a structure that improves the business position, not simply move several loans to another lender.
The basic concept is similar because one vehicle loan replaces another.
Commercial truck refinancing generally involves more business assessment.
The lender may consider:
A prime mover used for interstate transport therefore presents differently from a personal car refinance.
Generally, refinancing replaces the finance facility rather than purchasing the truck again.
The business already owns the truck.
Refinancing the loan does not mean the truck has been purchased for a second time.
Interest and other finance costs can have their own tax treatment.
Speak with your accountant about how the new finance should be treated.
TAFS starts by reviewing:
This establishes the current position.
The internal credit team can assess:
TAFS can consider:
TAFS starts with a soft credit check that leaves no mark on the applicant's credit file.
TAFS has access to more than 80 bank and non-bank lenders.
The refinance can be compared with lenders based on:
TAFS can compare:
The purpose is to establish whether the refinance provides a meaningful benefit.
Once the business selects a suitable option, one formal application is submitted to the chosen lender.
The new lender pays out the existing finance.
The current lender releases its security.
The new lender registers its security over the truck.
The business then begins making repayments under the new facility.
Before changing your truck finance, ask:
Yes.
Truck loan refinancing can potentially lower repayments through a more suitable interest rate, longer term, different balloon payment or a combination of these.
The complete finance cost should still be compared before proceeding.
No.
A lower monthly payment can come from extending the finance term or increasing the balloon.
That may increase the total finance cost.
Potentially.
A business may qualify differently if its trading history, financial position, repayment record or credit conduct has improved.
The available rate depends on current lender criteria.
Generally, yes.
Spreading the outstanding balance across more repayments normally reduces the regular payment.
The business remains in debt for longer.
Potentially.
A bank decline means the application did not meet that lender's requirements.
Another lender may have different criteria.
Before making another formal application, first understand why the previous application was declined.
Not necessarily.
Different lenders can assess ABN age, documentation, credit history, truck age and repayment capacity differently.
The reason for the decline is important.
TAFS does not use that approach.
TAFS starts with a soft credit check and internal assessment before making one formal application to the selected lender.
They may assess:
There is no single minimum timeframe across every commercial lender.
The lender may consider repayment history, payout, truck value and whether the refinance provides a reasonable commercial benefit.
Yes.
Owner-operators and sole traders can apply for truck loan refinancing subject to lender criteria.
Yes.
Selected lenders refinance used commercial trucks.
Age, kilometres, condition, payout and value can affect the available options.
Potentially.
The lender will consider the truck's age, condition, market value and expected remaining working life.
Yes.
The existing balloon forms part of the current finance payout.
The replacement facility may also include a balloon subject to lender criteria.
Yes.
TAFS primarily arranges truck finance through chattel mortgage structures.
The new lender can pay out the existing facility and register replacement security over the truck.
Potentially.
Selected lenders may assess eligible applications using bank statements and other supporting business information instead of complete financial statements.
Potentially.
Selected lenders may consider businesses with ATO debt depending on the amount owing, payment arrangement, cash flow and complete financial position.
Potentially.
The options depend on the nature of the issue, current conduct, business position, truck value and payout.
Potentially.
Fleet operators may be able to review several commercial vehicle facilities as part of a broader refinance.
For an initial assessment, you may need:
Further truck and financial information may be requested depending on the lender.
Straightforward applications can be approved in as little as 24 hours once the required information is available.
Settlement may take additional time while the current payout, security release, vehicle details and new finance documents are completed.
No.
TAFS starts with a soft credit check and internal credit assessment, compares suitable lender options and then submits one formal application to the selected lender.
Truck loan refinancing can provide a useful way to reduce repayments, restructure existing finance or improve business cash flow.
The important part is understanding exactly how the proposed refinance compares with the current loan.
TAFS can review your existing repayment, payout, interest rate, remaining term, balloon, truck value and business position before comparing suitable refinance options through access to more than 80 bank and non-bank lenders.
The Asset Finance Shop (TAFS) is a commercial asset finance brokerage based in Sydney.
Information on this page is general in nature and doesn't take your personal circumstances into account. Speak to a TAFS broker for options tailored to your business, and to your accountant regarding tax treatment.