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Finalising Residual, Buyback and Balloon Payments

If you’re approaching the end of your truck loan term then it could be time to start thinking about how you are going to finance or payout the residual, balloon or buyback amount on your loan. Whether or not your existing truck loan was arranged through Jade Truck Loans, our consultants are ready to discuss how we can assist you with options for finalising the buyback/balloon/residual.

For those in the process of arranging a new truck loan, this information on how to structure your truck loan and the options available for paying the final monies owed we hope will be helpful in planning your loan and looking ahead to the end of the loan term.

For the purchase of trucks, Jade Truck Loans offers the full portfolio of commercial finance products which include Rent-to-Own, Leasing, Commercial Hire Purchase and Chattel Mortgage. A feature of these finance products which clearly differentiates them from personal vehicle loans is the inclusion of a balloon/residual/buyback amount. For Rent-to-Own finance this is the buyback, for leasing it is known as a residual and for CHP and Chattel Mortgage it is a balloon. Regardless of which truck finance product you have opted for, the determination, structure of this ‘payout’ and options for finalising it are the same or similar in most cases.

For all loan types, it is an amount of the loan, usually calculated as a percentage of the truck purchase price, which is not included in the monthly repayments but is deferred to be paid in a lump sum at the end of the truck finance term. It is a fixed amount and remains fixed from when the loan is arranged to the due date.

Setting the Payout Upfront

Opting for a larger amount when you are arranging your loan say with your Jade Truck Loan consultant may seem an attractive option as it reduces your monthly repayment amounts over the entire loan term. But wait – it’s not that straightforward. Individual lenders may set their own requirements for these amounts, the ATO also has a say in the residual amounts for truck leasing and be mindful that you will be paying interest on the amount. You also don’t necessarily want to get to the payout time and find that you owe way more on your truck than it is actually valued at.

Your Jade consultant will work with you to structure your truck loan with the balloon/residual/buyback that best meets your objectives, the lender guidelines and within ATO rulings. But we always advise customers to consult with their accountant to ensure the amount meets their individual business objectives.

While loan terms on trucks can be 7-10 years and it may be challenging to forecast your financial position that far ahead, giving due consideration to this issue upfront may ease the burden down the track.

Finance/Payout Options

The buyback/residual/balloon is due for payment in full, immediately after the monthly repayments are completed. So when should you start thinking about how you are going to make this payout amount? That will depend on the individual but with all major financial matters it’s probably wise to plan ahead and be organised so you’re not caught short and have to make rash decisions.

Jade Truck Loans is available to discuss the options we can offer at any time you want. So what are the options? First you need to contact your lender and get the exact payout amount. For Rent-to-Own finance this may involve negotiating the buyback amount with the lender.

  • Using Cash Resources: for businesses with the cash reserves, they may opt to payout the residual with their existing monies and then they own the truck outright. This will involve simply paying the monies owed to the lender.
  • Trade-in: for those upgrading to a new truck, you may be aiming for trade-in to cover the payout. If that happens, the payout is finalised between the dealer and lender during the new truck purchase process.
  • New Truck Loan: for those choosing to keep their truck, a popular way to meet the payout is to refinance the payout with a new truck loan. Your Jade Truck Loans consultant can arrange a quote for you and handle the entire process.With interest rates at current low levels, this may be a very attractive option for many operators. It allows you to keep your cash reserves for other purposes and establish your business finance strategy for the next loan term.

    The loan options for refinancing are the same as for new truck loans: Rent-to-Own, Leasing, Chattel Mortgage and CHP. The truck will now be considered a used vehicle (as opposed to say new when you first purchased it) and individual lenders may have loan guidelines around age and condition in making a loan offer. Your Jade consultant will advise if applicable.

    Your Jade consultant will source you a cheap truck loan quote from our vast network of lenders and structure your loan to best meet your requirements. The interest rate will be fixed, loan term fixed, repayments fixed and once again, a balloon/residual/buyback is optional.

  • Business Loan: if none of the above options are achievable due to the age/condition of the truck or your individual business circumstances, your Jade consultant can explore other avenues and possibly a secured or unsecure business loan.

Once the payout is finalised, the ownership of the truck is transferred from lender to borrower or in the case of Chattel Mortgage, the security is released. If a new loan is established, the ownership or security will be transferred to the new lender.

Jade Truck Loans consultants are highly experienced in structuring workable truck loan solutions and we always welcome enquiries to discuss finance options.

To discuss your options for finalising a truck loan payout, contact Jade Truck Loans on 1300 000 003

DISCLAIMER: ALL INFORMATION PRESENTED IN THESE ARTICLES IS FOR GENERAL INFORMATIONAL PURPOSES AND BUSINESSES AND INDIVIDUALS SHOULD SEEK INDEPENDENT FINANCIAL ADVICE IN REGARD TO THEIR OWN FINANCIAL DECISIONS AND CIRCUMSTANCES. DETAILS ON GOVERNMENT MEASURES, POLICIES AND GUIDELINES AND VEHICLE DETAILS AND SPECS HAVE BEEN SOURCED FROM PUBLICLY AVAILABLE WEBSITES AND SOURCES. LIABILITY IS NOT ACCEPTED FOR ERRORS IN INTERPRETATION OR PRESENTATION OF ANY FACTS AND DETAILS FROM THIRD PARTIES. WE ADVISE INDIVIDUALS TO CHECK DETAILS DIRECTLY AT THE THIRD PARTY SOURCE IF REQUIRED.

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