Prime movers and trailers are usually bought together and financed together. That is convenient, but the two assets behave very differently. A trailer can outlast several trucks, and a prime mover is where most of your running cost sits. Getting the finance terms to reflect that difference is one of the simplest ways to make repayments sit more comfortably.
Two assets, two lives
A prime mover works hard, adds kilometres quickly and is subject to engine and driveline wear. Its value depends on age and kilometres, and it tends to need replacing sooner. A trailer has fewer moving parts and a longer working life, and its value holds up if it is maintained. Treating them the same on term and balloon can leave you paying more than you need to on the trailer, or carrying a larger residual risk on the truck.
Common finance structures
The names vary by lender, but the main commercial structures are broadly these. Tax and accounting treatment differs between them, so check with your accountant before choosing.
| Structure | How it generally works | Points to consider |
|---|---|---|
| Chattel mortgage | You own the asset from day one and the lender holds security over it | Often used for trucks and trailers. A balloon may be available |
| Finance lease | The lender owns the asset and you lease it for the term | End of term options vary, so read the residual terms closely |
| Hire purchase | You hire the asset and ownership transfers at the end | Structure and tax treatment differ from a chattel mortgage |
Matching term and balloon to the asset
A longer term on the trailer is often reasonable, since it is likely to be in service well beyond the end of the agreement. On the truck, a shorter term with a balloon that reflects realistic resale value may suit. Lenders each have rules on age and maximum term, which also depend on whether the asset is new or used.
Think about when you expect to replace each unit. If you plan to trade the truck at four years and keep the trailer for ten, financing them as a single bundle with the same term may not serve either plan.
Financing together or separately
Bundling can simplify admin and make the application neater. Separating gives you more flexibility to sell or refinance one asset without touching the other. There is no single right answer. We tend to look at what the operator plans to do with each unit over the next few years, and let that decide.
Deposit, residual and the repayment
A larger deposit lowers the amount financed and so the repayment. A higher balloon lowers the repayment but leaves a bigger lump sum at the end. Neither is automatically better. If your cash flow is steady and you want to own the asset outright sooner, a smaller balloon may make more sense. If you need cash for other uses, a larger one may suit.
What lenders typically ask for
- Details of the truck or trailer, such as make, model, year and price
- Your business details and ABN
- Recent financials or bank statements, depending on the lender and the amount
- Evidence of the deposit or trade-in
- Details of existing finance commitments
Our truck finance and trailer finance pages cover what to prepare, and for multiple units fleet finance may be worth a look.
Compliance considerations
Trailers and heavy vehicles are subject to registration, mass and maintenance requirements, and the National Heavy Vehicle Regulator publishes information on those obligations. Factor ongoing compliance costs into your running budget alongside the repayment.
Illustrative comparison of two structures
Take a prime mover and a trailer being bought together. In the first structure, both are financed over five years with the same balloon percentage. In the second, the truck is financed over four years with a moderate balloon and the trailer over seven years with little or no balloon. The second structure has a higher truck repayment and a lower trailer repayment. What changes is the risk: the operator carries less residual exposure on the truck, and spreads the trailer cost across more of its working life.
Neither structure is right for everyone, and the numbers would depend on price, rate and deposit. The point is that tying term and balloon to each asset’s life can be more useful than defaulting to the same terms on everything.
Questions to ask a lender or broker
- What is the maximum term for this age and type of asset?
- What balloon or residual options are available?
- Are there early repayment costs, and how are they calculated?
- Is the rate fixed for the full term, or does it reset?
- What security do you require beyond the asset itself?
- What insurance must I hold, and who must be noted on the policy?
- What are the establishment and ongoing fees?
Write the answers down for each option. When you set them side by side, differences that were hard to spot in conversation tend to stand out.
Paperwork to have ready
For a truck and trailer application, lenders commonly ask for the supplier invoice or quote, identification and business details, recent financial information and details of existing commitments. For used units, expect questions on service history and previous ownership. Having these prepared before you apply usually shortens the process, although approval is always subject to the lender’s assessment.
Insurance is another thing to arrange early. Lenders typically require comprehensive cover with their interest noted, and settlement cannot proceed until it is in place.
Frequently asked questions
Can I finance a used trailer?
Often yes. Lenders may apply age limits, so term and rate can differ from those for a new trailer.
Is a balloon a good idea on a trailer?
It can lower repayments, but trailers hold value well, so a balloon may not be needed. Discuss both options.
Do I need a deposit?
Some lenders will finance the full amount for strong applicants, while others expect a deposit. Terms vary.
How long does approval take?
It depends on the lender and the documents supplied. Having paperwork ready tends to speed things up.
Next step
Tell us which assets you have in mind and how long you plan to keep them, and we will suggest structures to compare. Contact TYG Finance or call 1300 894 894.
General information only. Finance is subject to lender approval, and results vary based on individual circumstances.
