Advance vs Arrears Repayments in Truck and Trailer Finance

Truck & Trailer Finance Australia

When you’re financing a truck, trailer, or heavy vehicle, one of the key things to understand is how advance vs arrears repayments are structured. The timing of your repayments can affect both your cash flow and the total interest you pay over the life of the loan.

What Are Advance Repayments?

With advance repayments, your first truck or trailer loan payment is taken on the day of settlement.

• Example: If your truck loan settles on 1 June, you’ll make your first repayment on that same day.
• This structure means the lender gets paid upfront and you start reducing the balance straight away.

What Are Arrears Repayments?

With arrears repayments, your first loan repayment comes at the end of the payment period — usually one month after settlement.

• Example: If your loan settles on 1 June, your first repayment is due on 1 July.
• This gives you a short cash flow buffer, but it comes with a cost.

Advance vs Arrears: Key Differences

Advance Repayments

• ✅ Reduces principal earlier
• ✅ Less interest paid overall
• ❌ Requires immediate cash at settlement
• ❌ Can be harder to manage if your business is waiting on customer payments

Arrears Repayments

• ✅ Improves short-term cash flow
• ✅ Gives you time to get paid for your first jobs before repaying the loan
• ❌ Not all lenders allow arrears
• ❌ More interest accrues, meaning you’ll pay slightly more over the term

Why Transport Operators Need to Consider Repayment Structure

If you’re running a transport business or working as an owner-driver, you know payments from clients don’t always arrive immediately after delivery. That’s why the choice between advance and arrears matters:

• Most banks and finance companies (especially in the used truck and trailer market) only allow advance repayments.
• This means you need to be prepared to pay your first installment on settlement day — often before you’ve even picked up the vehicle.

Practical Example

• Loan: $120,000 over 5 years
• Rate: 7%
• Advance: First repayment due at settlement → slightly lower overall interest paid
• Arrears: First repayment due one month later → more cash flow flexibility but higher total interest

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