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| Option | Potential fit | Main trade-off |
|---|---|---|
| Equipment loan or chattel mortgage | Equipment you expect to own and use for years | You carry ownership, maintenance and resale risks. |
| Hire purchase | Use now, with ownership transferring under the agreement | Check the final payment and transfer conditions. |
| Lease | Access to equipment without buying it at the outset | Check end-of-term obligations; an upgrade is not automatically free. |
| Short-term hire | An uncertain workload or a temporary contract | A higher daily cost may buy flexibility and avoid idle equipment. |
| Cash purchase | A purchase affordable without draining reserves | Cash is tied up immediately. |
Build the full equipment budget
Include delivery, installation, training, accessories, software, maintenance and the cost of downtime. Check whether the finance covers these items or only the asset invoice. A machine which needs a site upgrade can cost substantially more than its advertised price.
Obtain an independent cash price before comparing dealer or supplier finance. A discount on the asset and a low finance rate can produce different overall results.
What the finance structure changes
An equipment loan usually finances an asset the business buys, while a lease provides use under the lease agreement. Hire purchase has its own title-transfer conditions. Do not infer a right to buy, return or upgrade from the word “lease”: ask for the end-of-term options and any residual obligation in writing. business.gov.au's buying and leasing guide explains the importance of ownership, maintenance and flexibility in the choice (checked 5 October 2026).
Buying can suit equipment used consistently for a long period, especially when retaining it after the finance ends has value. Leasing or hiring may suit a shorter commitment, uncertain demand or equipment that changes quickly. The comparison should include the cost of returning or replacing the item, not just the instalments during the first agreement.
Responsibility for repairs matters. A finance arrangement does not necessarily provide maintenance or substitute equipment if the asset fails. Check the warranty, service support and any maintenance contract separately. If the business cannot operate without the machine, budget for a practical response to downtime.
Check the asset before committing to the finance
For used equipment, inspect condition, hours or usage, service records and the availability of parts. Ask who owns it and whether existing finance must be paid out. A lender agreeing to finance an asset does not establish that the machine meets your operational requirements or is priced fairly.
Get an itemised supplier quote covering the asset, delivery, installation and any accessories. A machine can be affordable on its own but unusable without an electrical upgrade, extraction system or licensed operator. Confirm which of those costs the lender will fund and which require cash before delivery. Keep supplier deposits and finance settlement timing aligned.
Match the term to useful life
A longer term spreads principal repayments but may leave debt outstanding when the equipment needs replacement. Assess the likely working life in your business, not just the manufacturer's description. Used equipment also needs a view of condition, service history and repair risk.
Westpac's equipment finance information illustrates the basic distinction: a loan finances an asset you own, while hire purchase transfers ownership after the final repayment. The actual contract determines the details and any additional security.
Make a balloon visible
A balloon defers part of the principal to the end. It lowers regular repayments compared with repaying the same loan fully over the term, but leaves a lump sum and can increase interest paid. It is not a guaranteed resale value.
For illustration, if you owe $20,000 at the end and can sell the machine for only $14,000 after costs, the $6,000 gap still needs funding. Plan for the final payment without assuming another lender will refinance it.
Prepare for delivery, not just approval
Have the business financial information, existing commitments, asset specification and purchase quote ready. Ask whether funds are paid directly to the supplier and which documents are required first. For an imported or custom-built machine, check the treatment of deposits and progress payments rather than assuming a conventional asset loan can cover every stage.
For a growing business, explain what extra work the equipment supports and what evidence exists for that work. A signed contract and a hope of attracting new customers should not be treated as equal certainty. Include staffing, materials and operating cash needed to use the new capacity.
If you may sell or upgrade early
Request the payout method and any fees before accepting. A fixed-rate agreement can have a different exit cost from the outstanding principal shown on an illustrative schedule. Westpac's equipment finance fee information refers borrowers to their agreement for break-cost calculations (checked 5 October 2026); other providers have their own terms.
Compare the estimated payout with a conservative sale value at the likely upgrade date. A trade-in quote is useful only once any old finance is accounted for. If resale leaves a gap, the business needs a way to fund it without assuming another lender will add the shortfall to a replacement loan.
Work out how much use pays for the machine
For an illustrative comparison, suppose ownership adds $1,200 a month in finance and maintenance, while hiring costs $300 for each day you need the equipment. Four hire days cost the same $1,200. That is a starting point, not a buying rule: allow for delivery, availability, downtime, ownership costs omitted from the estimate and the asset's value at the end.
Use the quieter months in that comparison. Buying may be worthwhile for reliable, repeated work. Hiring can preserve cash where the workload is uncertain or a contract is short. If the machine is meant to save labour, identify the paid hours or additional capacity the business will actually gain.
Once the purchase case is sound, obtain like-for-like finance quotes and ask an accountant about the applicable GST and income tax treatment. A deduction reduces a qualifying cost; it does not make an unnecessary machine useful.
Equipment finance rates and the complete purchase cost
For context, the RBA reports 7.23% p.a. for new small-business loans in August 2026. This is an average across different loan types, not a quote for this product or a rate every borrower can obtain. See how to compare business loan rates and use your written offer for the repayment calculation. Source checked 10 October 2026.
A lower dealer repayment can conceal a higher purchase cost
On the same illustrative $100,000 financed over five years with no deposit, balloon or fees, 8% p.a. gives about $2,027.64 a month; 12% gives $2,224.44. Total repayments differ by about $11,808.32. SMB Loan calculation using monthly reducing-balance interest; the rates are assumptions, not lender offers.
Obtain the equipment cash price and finance quote separately. If a dealer changes the cash price, deposit or final payment between quotes, recalculate using the same inputs before calling either offer cheaper.
Compare financing with retaining cash
Buying outright avoids finance charges but reduces the cash available for wages, stock and unexpected costs. Financing preserves more cash initially but adds fixed commitments. Compare those consequences using a cash forecast that includes the asset's operating costs and realistic contribution to income.
For illustration, spending $40,000 from a $55,000 reserve leaves $15,000. Whether that is prudent depends on the business's upcoming commitments, not the fact that the purchase is debt-free. Conversely, preserving the reserve with finance is less useful if the new instalments cannot be met from normal trading.
Using an existing asset to raise cash
An asset's purchase price is not necessarily its current lending value. Age, resale market, existing security and the lender's valuation all matter. Confirm whether another creditor already has rights over it.
For example, releasing cash against a delivery vehicle may preserve payroll today, but the new repayments and possible loss of that vehicle must fit the recovery plan. Funding an ongoing operating loss against more assets does not remove the loss.
Distinguish a secured loan from selling and leasing back
In a secured borrowing proposal, the business offers an asset as security under the agreed terms. In a sale-and-leaseback proposal, the transaction includes a sale and a new right to use the asset. Ask exactly what changes hands, what cash is released after costs and what must happen to retain or recover ownership later.
Existing finance or another creditor's security may need to be dealt with first. Ask advisers to check the asset records and relevant registrations. A purchase invoice or a fully depreciated accounting value does not by itself establish the asset's current market value or freedom from competing interests.
Compare the money released with the new rental or repayment obligation over the whole expected period of use. If the asset is essential, include the operational consequence of losing access. The transaction should support a credible business need rather than obscure a continuing cash deficit.
Keep tax treatment separate from the sales pitch
GST credits, depreciation and interest deductions depend on the arrangement, business use and applicable rules. A lease is not automatically “off balance sheet”, and a loan instalment is not automatically deductible in full. Give your accountant the proposed documents before relying on a claimed benefit.
Select a structure around the asset’s use, expected life and ownership plan, then compare provider quotes. Give the actual agreements to your accountant before including any claimed tax benefit in the decision.
Asset-finance fees to confirm in the quote
Provider sources checked on 10 October 2026. CommBank’s car and equipment finance page describes a one-off documentation fee, paid upfront or financed, without publishing a universal amount. Its product starts at $20,000 and has no monthly loan fees. Eligibility and the offered rate still require assessment.
Westpac’s live equipment-loan page links a fee schedule dated 23 August 2024. That schedule states a $500 vehicle/equipment establishment fee, with inspection, registration and other charges where applicable. It lists early termination charges separately from variable break costs. Confirm the current quote: a linked older fee schedule is useful evidence of the charge structure, but is not a promise that every 2026 application receives those amounts.