Trucks & Heavy Equipment Rental

Explainer: Trucks & Heavy Equipment Rental

Rental is a type of commercial finance product which is quite popular for operators when purchasing trucks and heavy equipment. Rental is also known as Rent to Own and Operating Lease. Understandably, to most people, this is just complex financial accounting jargon. We’re offering this plain-speak explainer so you better understand what is involved in a Rental finance agreement.

Rental or Rent to Own: Key Features

  • In principle, the lender purchases the vehicle and rents it back to the borrower for a fixed rental payment over a fixed rental (loan) term.
  • An off-balance sheet product which means that the vehicle is entered as an asset/liability on the balance sheet of the borrower not the lender. This can improve the balance sheet for the borrower which may be a financial objective for some businesses.
  • During the rental/loan term, the lender retains ownership of the vehicle but the borrower has full use of the vehicle and is responsible for the ongoing maintenance, operating expenses and other costs involved in upkeep.
  • The interest rate is fixed for the term of the rental agreement.
  • The monthly rental payment is a fixed amount, is tax deductible and GST is applied.
  • The rental term (loan term) is fixed. This may be up to 7 years, depending on lender guidelines and the value of the vehicle.
  • Rental agreements usually have an option for a ‘buyback’. This is a percentage of the initial purchase price which is set aside or deferred for payment at the end of the loan term.
  • Available for both new and used vehicles, purchased at auction, from a dealer or private seller.
  • At the conclusion of the rental term, the borrower negotiates a price to pay out the loan or buy back the vehicle and when this is finalised the ownership is transferred from the lender to the borrower.

Sourcing a Rental Loan

Truck or heavy equipment rental is a widely used finance facility and is available from many banks and lenders. A quick check on your bank’s website will reveal details of their heavy equipment finance options. You will just as quickly see some of the conditions that they place on such finance agreements. These may include the total amount loaned, loan term and other conditions.

Many business people opt to use a finance broker to source their finance including rental or rent to own deals. The advantages of using a broker include giving you more choice of lenders due to the broker’s accreditation with multiple lenders; their specialist contacts in the heavy equipment lending market; negotiating skills and bargaining power to secure cheaper rates and more flexible rental conditions; and saving you time by handling the paperwork.

If you’re interested in talking heavy equipment rental, we know people who operate in the financial services sector and have experience in truck and heavy equipment loans. We can easily connect you with them. Just contact us for details.