In the current scenario of rising interest rates, having the tools such as an equipment finance repayment calculator to support planning for asset acquisitions can be extremely helpful. The RBA held the cash rate at the record low of 0.1% between November 2020 and May 2022. During this period, it may have been somewhat easier to plan and budget for investment in new assets as there were low prospects of a rate rise.
But now we have seen the RBA act to lift the cash rate in three consecutive months by a total of 1.25% and more increases are in store. The largest of the recent rises was 0.5%. A significant amount when lenders increase their rates across their markets. That added interest increases the repayments which can impact cash flow and the total interest payable on the finance which effectively increases the cost of the equipment.
With the June unemployment figures revealing a massive drop, the pressure is now on the RBA with some expected that the August rate rise may be as much as 1%. The RBA has indicated more steps will be taken so further rises after August cannot be totally ruled out.
Being in a position to factor in all scenarios and contingencies when preparing forward budgets for asset purchases can be extremely helpful for getting the timing and figures right. An equipment finance repayment calculator allows businesses to prepare budgets and forecasts for purchases based on estimated repayments at different rates.
We provide a number of calculators to assist businesses with this task. Optimising their capabilities while appreciating their limitations will result in the most effective and productive use of these finance tools.
Effective Use of Finance Calculator
Our two main finance calculators are the Interest Rate Comparison Calculator and the Equipment Finance Calculator. The interest rate version shows the current rates for our portfolio of finance products. Users can quickly compare estimated repayments on the same finance amount for different loan products such as Leasing compared with Chattel Mortgage. This may assist with selection of finance product.
The finance calculator allows for more individual calculations with balloon/residual and other features.
Using a finance calculator is a relatively straightforward and simple process. The finance amount required is entered with the interest rate, preferred finance term and the preferred balloon or residual percentage.
When entering the finance total, do not deduct the balloon/residual amount. Include the full amount as the device will allow for the balloon when carrying out the calculations.
For planning purposes, business owners can input different interest rates and note the resulting repayments. Note – the calculator has no memory. You will need to record the results in spreadsheets or in notes for future reference.
By calculating repayment estimates based on different interest rates, businesses can allow contingencies for future rate rises in their planning. If the asset acquisition is planned for later this year, it would be unrealistic to expect today’s interest rates to be in place at that time, based on RBA indications.
Considerations and Realistic Expectations
Equipment finance calculators are extremely helpful for planning and really, a must-use resource prior to a purchase of plant, machinery or equipment. But the results shown must be taken and used in context and with consideration of how lenders arrive at finance offers and other aspects.
- Repayments shown on a calculator are estimates only.
- Calculator figures are not finance offers, approvals or quotes.
- All typical fees and charges are not included as these can vary with lenders.
- Lenders have guidelines around the loan elements they will approve. The loan term and finance amount requested by an individual applicant may not be approved.
- Assessment of the credit rating will impact the interest rate and other loan elements.
- Advertised interest rates are best offers and the actual rate offered may vary.
- Low Docs No Doc Finance may attract additional conditions such as limits on total loan amount and additional security.
- Interest rates vary across different industry sectors.
- New and used equipment may attract different rates and loan conditions.
On the positive side – when preparing asset acquisition budgets, don’t forget to work balancing probable rate rises with increased tax deductions which may be realised in 2022/23. Temporary full expensing and Loss Carry Back are available for eligible businesses and eligible acquisitions and significant tax benefits may be realised.
To utilise the accelerated asset depreciation measure of temporary full expensing, Chattel Mortgage is seen as the most suitable form of finance.
Acquiring Specific Equipment Finance Quotes
Finance calculators are extremely helpful in preparing budget estimates, comparing different makes and models of machinery and with other issues around purchasing equipment with finance. But the result generated by a calculator should not be used as definite indication of a finance offer.
After or before using a calculator, contact us for a specific finance quote based on your exact requirements. Our consultants will work with you to source the cheapest interest rate quotes for either planning or purchase purposes.
To clarify results generated by a finance calculator contact Jade Equipment Finance on 1300 000 003 for a quote.
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.