With their low rates, commercial vehicles attract high demand. Infact, commercial asset finance makes up around 60% of Nodifi’s deals.
For the next installment of Assets in the Spotlight, we take a look at commercial motor vehicles.
Key Takeaways
- ‘Commercial vehicle’ is a term that applies to more vehicles than it might seem
- Nodifi is able to negotiate rates lower than 2.85% on large ticket items
- Sometimes borrowers require additional funding for signage and vehicle outfitting
- Visa holders make up a considerable number of commercial borrowers
Commercial vehicles finance in a nutshell
When hearing the words ‘commercial vehicles’, often vans, light delivery trucks and trade utes come to mind but the term includes many more.
For example, fleet vehicles which include sedans and hatchbacks. District nurse vehicles are often hatchbacks or small cars.
Rideshare drivers are typically self-employed which can give them access to commercial vehicle finance too.
Over the last few years, Nodifi has seen an increasing number of finance enquiries from rideshare drivers. Due to the requirements of companies such as Uber, rideshare vehicles are 4-door cars or passenger vans manufactured within the last eight years (often earlier).
The all important rates
Commercial vehicle finance generally attracts lower rates than consumer finance. This is because of a few reasons;
- Business assets
- Typically higher loan amounts
Nodifi’s commercial rates start at 2.85%, however, Nodifi is able to negotiate lower rates when dealing with large ticket lends.
Common rates per client profile
- Vehicle less than 2 years old / property owner / long-term ABN and GST / excellent credit score (700+): 2.85 – 4%
- 3 – 5 year-old vehicle / property owner / under 3 year ABN and GST / average credit score (550): 4 – 6.5%
- Vehicle over 5 years old / non property owner / minimal trading history / low credit score (400 and below): 6.5%+
Trading history, or the length of time a borrower has been earning an income, varies per lender and per financials.
How much can my client borrow?
Similarly to all forms of finance, a lending institution will look at a borrower’s ability to earn capital and pay off the loan within the loan term.
Minimum lends begin at $5,000 (net amount finance) and typically don’t have a set maximum ceiling amount. Often, the maximum lend amount comes down to the borrower’s ability to make payments.
Loan terms range between 12 and 84 months depending on the lender.
Signage and outfitting
Sometimes commercial vehicles require additional modifications. For example, Shelving and cabinets in trade vans or signage / vinyls on vehicle exteriors. Some lenders can arrange a dual disbursement of funds – some going to the vehicle vendor and some to the borrower to cover additional costs.
Trailers and other business equipment
Some commercial borrowers require funds to purchase not only a vehicle but also tools or other machinery.
A plumber needing cutting saws or welding equipment is a common example.
Documents and information
Borrowers will need to supply identification, a signed privacy consent form and their ABN details.
Depending on the borrower’s profile, commercial loans are typically split into three categories:
Full-Doc
All financial documents are required to prove income and serviceability. BAS statements, bank statements and ABN and GST registration. The loan amount and loan term are determined by these documents.
Low-Doc
Some financial documentation is required such as bank statements and payslips. These suit clients with 12 months or more trading under ABN and a clean credit history.
No-Doc
No financial documents are required by the lender to assess the deal.
New vs Used
Commercial vehicle finance can cover new and used vehicles. If your client is interested in a used commercial vehicle, just be wary that some might register high mileage, especially if they’ve accessed remote locations and construction sites.
Be sure your client checks the odometer reading and condition as high-mileage vehicles can attract higher rates than equally-aged low mileage vehicles.
Secured vs Unsecured
Like consumer loans, commercial finance includes both secured and unsecured loans on vehicles.
As secured loans use the vehicle as collateral, these attract lower interest rates.
Visas
It’s not uncommon to find commercial vehicle finance enquiries from non-Australian citizens.
Generally, visa holders must have a working visa with enough time remaining to pay off the loan.
Lenders typically do not provide finance to student visa holders.
Settlement
Commercial loans typically see turnaround times of one to two business days. This is especially true for low-doc and no-doc loans.
Times can increase as per the complexity of the loan and borrower’s financial situation.
Funds are transferred to the seller of the vehicle but, as mentioned above, can also be sent to the borrower when a dual disbursement is required.
Commercial vehicle finance in summary
It’s no wonder that Nodifi sees a huge portion of deals falling in the commercial vehicle category.
Interestingly, prior to the COVID pandemic, Australia’s 13-million strong workforce included 1.5 million sole traders. Despite this, in recent years, Australia’s army of sole traders has increased by 55,000 annually – over a thousand every week.
Australia’s huge demand for services and the low rates offered to commercial borrowers all make financing these vehicles an attractive option.
