Comparing Equipment Finance Without Getting Locked Into the Wrong Structure
The right equipment finance structure depends on whether you want to own the asset, claim maximum deductions, or keep repayments as low as possible. A chattel mortgage suits a Revesby tradie who wants to own the ute outright and claim depreciation, while hire purchase works for a Georges River manufacturer who prefers fixed monthly repayments with ownership at the end, and a lease makes sense for an IT business that upgrades computers every three years.
Most businesses start by comparing interest rates, but the rate tells you almost nothing about total cost if the structure, deposit, fees and balloon differ. We regularly see businesses choose the lowest advertised rate only to discover their actual repayment is higher than a competitor's slightly higher rate with lower fees and a larger balloon.
What Equipment Finance Actually Covers in Practice
Commercial equipment finance covers plant and equipment you use to generate business income. That includes work vehicles such as trucks, trailers and forklifts, manufacturing equipment including CNC machines and food processing lines, IT equipment from computers to servers, office equipment, printing equipment, agricultural equipment such as tractors and graders, construction machinery including excavators, cranes and dozers, and solar equipment for commercial installations.
The loan amount typically ranges from $10,000 to several million, with most lenders in the $20,000 to $500,000 range for standard applications. Revesby businesses near the Hume Highway corridor often finance logistics equipment and light commercial vehicles, while those in the Henry Lawson Drive industrial precinct lean toward warehouse automation equipment, forklifts and material handling systems.
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Chattel Mortgage Versus Hire Purchase: The Ownership Question
A chattel mortgage gives you ownership from day one. You secure the loan against the equipment, claim GST upfront if registered, and deduct interest plus depreciation. At the end of the term you own the asset outright or refinance any balloon. Hire purchase means the lender owns the equipment until the final payment, you claim the full repayment amount as a deduction during the life of the lease, and GST is claimed progressively on each payment rather than upfront.
Consider a Revesby mechanical workshop buying a $90,000 diagnostic machine. Under a chattel mortgage with a 20 per cent deposit and five-year term, the business claims the GST input credit of roughly $8,200 in the first BAS, deducts interest on each repayment, and writes down the asset under diminishing value or prime cost depreciation. The workshop owns the machine from month one. Under hire purchase for the same machine with no deposit, the lender retains title, the business deducts the entire monthly repayment as a lease expense, claims GST progressively, and takes ownership when the final payment clears. The tax outcome differs depending on the business's cash position, depreciation schedule and whether the equipment will be held long-term or replaced within a few years.
Equipment Leasing and When It Fits the Business Model
Industrial equipment leasing and operating leases suit businesses that upgrade technology frequently or want the equipment off their balance sheet. You pay a fixed monthly amount, claim the full lease payment as tax deductible, and at the end of the lease you return, upgrade or purchase the equipment at market value. There is no ownership during the lease, which means no depreciation claim and no residual value risk.
A Revesby accounting firm leasing office computers and printing equipment over three years avoids the upfront purchase price, maintains cashflow, upgrades to the latest technology at lease end, and treats the entire monthly cost as an operating expense. At the end of the term the equipment goes back to the lessor, and a new lease starts on replacement hardware. This structure works when technology moves quickly, the business prioritises cashflow over ownership, and the equipment has limited residual value after the lease period.
How to Compare Lenders and Finance Options Properly
Access equipment finance options from banks and lenders across Australia by comparing the same loan structure, not just the headline rate. Request a written quote showing the interest rate, comparison rate if applicable, application and establishment fees, monthly account-keeping fees, early repayment conditions, balloon or residual value, total repayment amount over the term, and any equipment valuation or documentation costs.
A manufacturer in the Georges River industrial area comparing a $150,000 materials handling system received three chattel mortgage quotes: Lender A at 7.2 per cent with a $1,500 establishment fee and no ongoing fees, Lender B at 6.9 per cent with a $995 establishment fee plus $15 monthly account fee, and Lender C at 7.5 per cent with zero fees and a higher balloon. Over five years, Lender A's total repayable was the lowest despite the mid-range rate, because the absence of monthly fees and a modest balloon reduced total interest. The decision came down to whether the business wanted to pay out or refinance the balloon at term end.
Fixed Monthly Repayments and Cashflow Certainty
Fixed monthly repayments lock your cost for the life of the lease or loan term, which protects against rate rises and makes budgeting straightforward. Most equipment finance is written on a fixed rate, unlike commercial property loans where variable is common. The certainty matters when you are managing cashflow around seasonal revenue or planning capital allocation across multiple equipment purchases.
A Revesby logistics business financing three delivery vans under a four-year hire purchase arrangement knows exactly what leaves the account each month, can forecast the total cost to lease end, and holds that rate regardless of RBA movements. The fixed repayment also simplifies tax planning, because the deductible amount does not fluctuate with rate changes during the term.
Deposit, Balloon and Term Trade-Offs You Actually Control
You control three levers: deposit size, balloon amount, and loan term. A larger deposit reduces the loan amount and total interest but ties up cash. A balloon defers part of the principal to the end, lowering monthly repayments but increasing total interest and requiring refinancing or a lump sum at maturity. A longer term reduces the monthly repayment but increases total interest paid over the life of the loan.
Run the numbers for your actual business position rather than accepting the default structure. A 20 per cent deposit, 30 per cent balloon and five-year term might suit a business with strong cash reserves and confidence in refinancing or selling the asset at term end. Zero deposit, zero balloon and three years suits a business that wants the debt cleared quickly and owns the asset outright without refinancing risk. There is no universal optimal structure, only the one that fits your cashflow, tax position and equipment replacement cycle.
Tax Deductible Equipment and Depreciation Timing
Plant and equipment finance is tax effective when structured correctly. Under a chattel mortgage, interest is deductible and the equipment is depreciated according to ATO effective life guidelines or under temporary full expensing rules if still available. Under hire purchase, the full repayment is deductible during the lease term. Under an operating lease, the lease payment is fully deductible as an operating expense, but you do not claim depreciation because you do not own the asset.
Talk to your accountant before signing, because timing the purchase to align with your financial year, choosing the right depreciation method, and structuring the finance to match your cash and tax position can materially change your after-tax cost. Equipment purchased and financed in June can generate a depreciation deduction in that financial year if using diminishing value and the asset is installed and ready for use, while the same purchase in July pushes the first deduction into the next year.
Collateral, Credit Assessment and Approval Speed
The equipment itself is the collateral under chattel mortgage and hire purchase, which means lenders assess the equipment's resale value, age and condition as part of the approval. Specialised machinery with a narrow secondary market or custom-built equipment may require a larger deposit or personal guarantee. Standard vehicles, IT equipment, and factory machinery with established resale markets typically need minimal additional security.
Approval speed depends on the lender, loan amount, and how complete your application is. A straightforward $50,000 vehicle finance application with two years of financials, a clear credit file, and a common make and model can settle in 48 hours. A $300,000 manufacturing equipment package with a complex group structure, offshore equipment suppliers, and a startup trading history can take two to three weeks. Submit financials, ABN registration, equipment quote or invoice, director identification, and a clear explanation of how the equipment improves business efficiency or revenue when you apply, and you will move faster than applicants who drip-feed documents.
Upgrading Existing Equipment or Buying New Technology
Buying new equipment gives you full warranty support, known specifications, and predictable useful life, but costs more upfront. Upgrading existing equipment or refinancing a current asset can free up capital without adding new equipment expense. Equipment leasing lets you return and upgrade at the end of the term without worrying about disposal or residual value risk.
A Revesby construction business replacing an eight-year-old excavator with a newer model financed the trade-in difference under a chattel mortgage, claimed depreciation on the new machine, and maintained the same monthly outgoing as the previous lease by extending the term by 12 months. The upgrade delivered better fuel economy, lower maintenance, and compliance with current emissions standards without a step-change in cashflow impact. Whether new purchase, upgrade or lease-and-return makes sense depends on how long you will use the equipment, how quickly the technology or regulation changes, and whether you want ownership or flexibility at term end.
Call one of our team or book an appointment at a time that works for you. We compare equipment finance options across banks and lenders Australia-wide, structure the loan to suit your business needs and tax position, and handle the paperwork so you can get the machinery, vehicles or technology in place and working.
Frequently Asked Questions
What is the difference between a chattel mortgage and hire purchase for equipment finance?
A chattel mortgage gives you ownership from day one, lets you claim GST upfront, and you deduct interest plus depreciation. Hire purchase means the lender owns the equipment until the final payment, you claim the full repayment as a deduction, and GST is claimed progressively on each payment.
Can I finance used equipment or does it have to be new?
You can finance used equipment, though lenders typically require the asset to be less than a certain age and assess resale value carefully. Standard vehicles, machinery and IT equipment with established secondary markets are easier to finance used than highly specialised or custom-built equipment.
How much deposit do I need for equipment finance?
Deposit requirements range from zero to 30 per cent depending on the lender, equipment type, and your business credit position. A larger deposit reduces the loan amount and total interest but ties up cash, while zero deposit preserves cashflow but increases repayments and total cost.
Is equipment finance tax deductible?
Yes, plant and equipment finance is tax deductible. Under a chattel mortgage you deduct interest and claim depreciation; under hire purchase you deduct the full repayment during the lease term; under an operating lease the lease payment is fully deductible as an operating expense.
How long does equipment finance approval take?
Approval speed depends on the lender, loan amount, and completeness of your application. A straightforward vehicle finance application with clear financials and a common asset can settle in 48 hours, while larger or more complex equipment packages can take two to three weeks.
