After 25 years in finance if someone would have told me a few years ago that a 7% interest rate was way too high I would have wondered which planet they came from. But that is the reality in today’s market.
We are now seeing on a daily basis motor vehicles and equipment financed at interest rates between 4.5% and 5.5%.
These rates are not the concoction of dealer based “sponsored” headline rates being supported by internal discounting on a “recommended retail” machine price, they are main stream rates.
But what does all of this really mean in $ terms?
A $50,000 car financed in 2012 on a 5 year by Nil residual term at 7% was $985 p/m, today at 5% it is $940 p/m which is $2,500 less over the entire loan and on a fleet of 10 cars it adds up.
A $500,000 machine financed in 2012 on a 5 year by Nil term at 7% was $9850 p/m, now at 4.75% it is $9350 p/m which is a whopping $30,000 less over the entire loan.
All things being equal these are saving should drop straight to the business owners’ bottom line. If you can save $10,000 a year in finance costs and your usual profit margin is 5% that is equal to adding another $200,000 in turnover to achieve the same outcome.
Table 1 provides a “ball park” indication of monthly payments on these historically low rates over various terms and residuals:-
Today’s ease of finance.
We now live in the world where many loans can be secured without going through the process of lengthy finance submissions.
The simple fact of being in business for two years, with a clean credit history and being a property owner will secure an immediate approval for vehicles or most equipment up to the value of $150,000 per individual item.
Even more remarkably, this same criteria will also secure approvals on multiple assets up to $500,000 each, where they are replacing or upgrading other machines coming to the end of their existing finance including the allowance for a 125% increase in monthly payments.
These new style of Fast Track facilities are provided at the historically low rates and are ideal for business owners who wish to spread their debt across a broader range of financiers without the hassle of submitting multiple complex finance applications.