When Truck Dealers or Heavy Machinery Dealers advertises 0% finance or some other unrealistic rate such as 2.99%, buyers should instantly start to ask questions as to how they can do this. Would it not make sense from a Commercial Investment point of view, for a business to investment money in other ventures that will generate a higher return than 0% or 2.99% ?
Whilst these low interest rate packages look very attractive on face value, customers quite often are not signing up to a good deal at all. Put it this way, if a dealer is charging no interest or very low interest, they need to be generating income in different ways.
Clients looking to purchase new machinery or equipment need to consider the following before signing up to these types of finance packages;
If a customer walks into a dealership and say they wish to purchase a particular item of equipment and finance it with the low rate interest finance package, the dealer will load the price of the machine as high as they possibly can. This price often is never negotiated down and a client may end up paying $15,000 more on the purchase price of that machine.
If a customer had financed the machine externally, they could have either negotiated the price down with that dealer or compared the same type of equipment with other dealerships.
If a customer signs up to the low rate interest package, another way the dealer generates additional income is by way of selling insurance polices (such as comprehensive vehicle, gap insurance and income protection insurance) that are added to the purchase price of the machine. These insurance policies are generally way above what would be offered through an external Commercial Insurance Broker.
Another way the dealer will look to recover profit through offering low interest rate finance is via the numbers on the traded machine. If a client is looking to trade a machine, the dealer will offer a very low trade amount to increase their margin on the transaction.
These low rate finance packages are generally very inflexible (ie term of the loan, balloon and repayments). As this is the case, this type of finance package may not be suitable to a particular client’s needs and may therefore place a strain on their cash flow position throughout the year.
Buyers need to be aware that zero or low rate finance offerings appear to be great deals, but actually are not. Dealers will seek to increase their profits through sneaky tactics and often at the client’s expense.
We are here to help any clients seeking to purchase new items of Heavy Machinery and are more than happy to discuss any finance package they have been provided. If we can break down the finance package, we can ascertain whether or not the client is receiving a good deal. If not, we can put a finance approval in place that will better suit and save the client money over the life of the loan.
Please contact us direct on 1300 788 740 or for an instant pre-approval, please input your details into the ONLINE-PREAPPROVAL page of our web site.