Refinancing a business vehicle loan

Why do businesses refinance vehicle loans?

Vehicle finance is set up on the day you buy, based on what you knew then. Businesses change. Refinancing is how you reset the finance to match where the business is now. The common triggers are:

• A balloon is due and you’d rather keep the vehicle and spread the final amount than pay it in one hit.
• You’ve got several vehicle loans with different lenders and dates, and want one simpler arrangement.
• The vehicle is worth more than you owe, and you’d like to release that equity for the business.
• Your business is stronger than when you bought — more trading history, better records — and you want the finance to reflect that.
• Cash flow has changed, and a different term would fit better.

What should you check before refinancing?

Before talking to any new lender, get the facts on what you have now:

1. Ask for a written payout figure from your current lender. It should show the balance, any early termination costs and fees, and how long the figure is valid.
2. Find your original contract and check for clauses about early payout or prepayment.
3. Work out what the vehicle is worth — make, model, year, kilometres and condition. A recent service record helps.
4. Pull together recent BAS or bank statements so a lender can see current trading.
5. Note any changes to the business — new structure, new ABN, new partners — since you took out the original loan.

If the payout costs outweigh the benefit, keeping the current loan may be the right answer. A good broker will tell you that.

Refinancing a balloon: the most common case

Balloons are useful on the way in and stressful on the way out if nobody planned for them. Your choices when one falls due are usually:

Option	What it involves
Pay it in cash	Simplest, but drains working capital
Refinance the balloon	New agreement over the vehicle for a further term
Trade in or sell	Sale proceeds clear the balloon; any surplus is yours
Upgrade	Trade in and finance a newer vehicle

Refinancing works best when the vehicle still has solid value and the business can show it has kept up repayments. Start three to six months before the due date — leaving it to the last week reduces your choices. Our balloon payments page covers the planning side.

Combining several vehicle loans

A business that has added vehicles one at a time can end up with four agreements on four different dates. Bringing them together can make admin and cash-flow planning much easier. Options include:

• refinancing each vehicle with the same lender on aligned terms;
• a single fleet facility for growing businesses (see fleet finance);
• for larger fleets and property owners, a property-secured loan from $20,000 to $5,000,000 that clears several vehicle loans at once.

Each has trade-offs. One facility is simpler, but it can mean putting more security on the line. We’ll explain them before you choose.

Releasing equity from a vehicle

If a vehicle is worth well above what’s owed, a refinance can release some of that difference as cash for the business. If the vehicle is fully paid off, a sale and leaseback is another route. Either way, the amount depends on a lender’s independent view of value, not the price you paid.

Illustrative example: a courier with a balloon in four months

Illustrative only. A courier sole trader has a van with a balloon due in four months. The van has been reliable and holds good value, and every repayment has been on time. Instead of draining the business account, he asks for a payout letter, sends us six months of bank statements and refinances the balloon over two more years. He keeps the van and his cash buffer, and sets a calendar reminder to plan the next changeover well ahead.

What if your credit has taken a hit since you bought?

It doesn’t automatically rule out a refinance. Lenders look at the whole story, and a clean repayment record on the vehicle you’re refinancing counts for a lot. Our page on vehicle finance after credit problems explains how lenders look at it.

Refinancing versus trading in

When a balloon is due or a vehicle is getting tired, refinancing isn’t the only path. A quick comparison:

	Refinance	Trade in or upgrade
Keep current vehicle	Yes	No
New finance	On the existing vehicle	On a replacement
Costs	Payout, establishment fees	Payout, new vehicle costs, on-road costs
Best when	Vehicle is reliable and holds value	Vehicle is ageing or no longer fits the work

If maintenance bills are climbing, our guide on whether to repair or replace can help you decide before you commit to another term on the same vehicle.

Refinancing to change structure

Sometimes the reason to refinance is the structure, not the numbers. A business might move from a personal car loan taken out years ago to finance in the business’s name, or bring a vehicle bought on a credit card into a proper chattel mortgage. Those changes can tidy up records and make the vehicle’s tax treatment clearer — talk to your accountant first.

What lenders look for in a refinance

• a clean repayment history on the current loan;
• current trading evidence — bank statements or BAS;
• the vehicle’s age and condition at the end of the new term;
• a payout figure that matches the vehicle’s value;
• any changes in ownership or structure of the business.

Ready to see whether refinancing stacks up?

If a balloon is coming, your loans are scattered or the vehicle has built up value, find out what your business could qualify for. The enquiry takes about a minute.

Asking doesn’t involve a credit check. Your enquiry isn’t passed around to every lender in town; a single specialist works through it and calls you. Have your payout figure handy if you can, and fill in the form as accurately as possible so we can compare your options properly. Begin here.