Ecolease Industry News
Once a month, Ecolease is going to share some helpful tips, tricks, and trends in equipment finance. We want to help give some insight into some of the benefits: demystify the processes and share some of what we have to offer. So please have a read and get in contact with us to find out more.
Vehicle Finance can be confusing. What should I look out for in an excellent finance product?
There is an absolute plethora of vehicle finance products on the market these days. There always seems to be a new shiny offering that promises low rates and simple approval processes. Unfortunately, it is a bit of a minefield as well, with many finance providers hiding costs and confusing would-be buyers.
When buying your new car, you want to get the best deal possible for the least money. This is where Ecolease can steer you through the shiny offers to find the one that actually makes the most financial sense over the term.
There are a few ways that we help steer our clients away from potential pitfalls.
Advertised Rates Versus Reality
Super low-interest rates seem great on paper, but often they are used as “click bait” to get you interested in talking to the dealer finance manager. Do your homework first to make sure you are onto a good thing.
Things to watch out for:
- Beware of added loan application fees and/or monthly charges as they soon eat into the benefit of low interest
- Generally, low-interest finance offers are for selected entry-level models or unpopular stock: you may not get your fully optioned vehicle if that is what you are after
- Often these offers require an upfront deposit and take the finance over a shorter term which will bump up your monthly payment. Check the terms suit your cash flow and how long you plan to hold on to your car
- Don’t expect to get much for your trade-in, where you save on the finance; you will more than likely lose on the trade.
New Versus Second Hand
When considering which way to go, don’t forget to factor in potential higher running costs of used vehicles compared with benefits of manufacturer warranties and servicing offers on new vehicles. There is a lot of value in a reliable fleet of cars.
Quite often with small businesses – credit ratings can make or break your ability to maintain cash flow. When you make multiple loan applications, it can potentially lower your credit rating, even if you’re just shopping around and not taking up the loan. This where using a broker like Ecolease will give you all the advice before we get to the application phase
Term savings or immediate cash flow
For any loan, you need to balance the availability of cash against longer-term savings. Generally, by opting for a longer term, you can reduce monthly repayments and free up cash flow. You also will benefit from tax deductions during the working life of the vehicle. This, of course, will come at the cost of interest savings.
Balloon or no balloon (also known as a Residual)
Balloon payments or Residuals help with cash flow by reducing the monthly repayments over the term of the loan. You can pay out the balloon at the end of the term, trade the vehicle or refinance for another year or two. It is important however to match the balloon with the anticipated value of the vehicle at the end of the term; you don’t want to be stuck owing more than what the vehicle is worth
How does “no financials” loans actually work?
No financials applications, or “Low doc loans” as they are commonly referred to, were designed to increase access to finance for small to mid-size businesses and reduce the cost and time in processing applications.
The criteria for approving these types of loans was developed on the premise that if a business had traded for more than two years, had a clear credit history and if the business owners were asset-backed (e.g. home-owners), then the chances that they would repay a loan on an asset such as a car, were very high. The statistics have proven this theory.
In the past with this type of finance, it generally meant you would pay a higher interest rate. This isn’t necessarily the case these days, particularly on car finance.
We are not assessing your financial statements for your ability to pay the new loan repayments. The onus is on you, the business owner, to know your business and its ability to make the repayments. As part of the documentation, some lenders ask you to sign a letter confirming that the business can afford the repayments, known as a “declaration of affordability.”
If you are unsure, this is where Ecolease can assist. We are happy to review your financial statements and do an assessment on whether or not your business can afford new equipment and vehicles.
Pre-approvals you can use at ANY dealership
We can also help with Pre-approvals so that when you go out to buy, you have the confidence and the convenience to sign on the spot at any dealership.
Rent to Own
At Ecolease we offer a range of equipment finance options, but the Rent to Own offering is one of our most popular. For a variety of reasons.
- 100% tax deductible – Rental payments are 100% tax deductible when equipment is used for business purposes.
- Simplicity and speed – A short phone application, simple documentation and approval within 24 hours… plus transactions less than $55,000 inc. GST don’t require financial statements*
- Conserves cash – Small monthly payments rather than one large upfront payment.
- Fixed monthly rental payments – make budgeting easy.
- Stand-alone facility – the equipment is the security, not your home
- Own it – for one extra month’s repayment at the end of the term you own the equipment!
* Subject to 24-hour credit approval and criteria; settlement conditions apply. Installation time is subject to agreed delivery date with the supplier. Finance Application Criteria: Australian Resident; hold a current ABN minimum 24 months; have a clear credit history; own property (if not, ABN minimum 5 years); no financials required for transactions up to $55,000 inc. GST.