Comparing equipment finance isn't about finding the cheapest rate. It's about matching the right structure to your cashflow, tax position, and how long you'll actually use the equipment.
What equipment finance structures are available
The three main options are chattel mortgage, hire purchase, and operating lease. A chattel mortgage lets you own the equipment from day one and claim GST upfront if you're registered. You make fixed monthly repayments, then pay a balloon at the end or refinance it. Hire purchase spreads the cost with no balloon, but you don't own the equipment until the final payment is made. An operating lease means you never own it - you pay for the right to use it over the life of the lease, then hand it back or upgrade.
Consider a manufacturer buying a $120,000 CNC machine. If they're GST registered and want to claim the full asset cost for depreciation, a chattel mortgage makes sense because they can claim the GST input credit immediately and structure repayments around production cycles. If they're not GST registered and want predictable costs with no residual, hire purchase gives them ownership at the end without a lump sum. If they're in a high-growth phase and want to upgrade to newer technology every three years, an operating lease keeps the equipment off the balance sheet and lets them walk away at lease end.
How interest rates and fees differ between lenders
Rates for equipment finance sit between car loan rates and unsecured business lending. Secured equipment with strong resale value attracts lower rates than specialised machinery that's hard to move. Lenders price differently depending on whether the equipment is considered plant and equipment finance, IT equipment finance, or vehicles. A truck or forklift might price at one rate, while robotics financing or printing equipment finance could sit higher because the secondary market is smaller.
Fees vary more than most people expect. Some lenders charge an establishment fee, a monthly account fee, and an early exit fee if you pay out the loan before term. Others bundle the cost into the rate. If you're comparing a 6.8% rate with a $995 setup fee against a 7.1% rate with no fees, the second option might cost less over a three-year term on a $50,000 loan amount. Ask for a comparison that includes all fees, not just the advertised rate.
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Fixed monthly repayments versus flexible structures
Most equipment finance uses fixed monthly repayments, which makes budgeting straightforward. You know exactly what leaves the account each month for the full term. Some lenders offer seasonal repayments for agricultural equipment or farming equipment, where you pay less during the off-season and more when income arrives. That structure suits a grain grower financing a harvester more than a suburban workshop buying a welder.
Flexible structures can include payment holidays, step-up repayments that start lower and increase as revenue grows, or the option to add equipment to the same facility without reapplying. If you're buying multiple assets over a year, a facility that lets you draw down as needed without multiple applications can reduce admin and keep the cost of finance lower than stacking separate loans.
Tax treatment and how it affects the real cost
Equipment finance is usually tax deductible on the interest and fees. If you're using a chattel mortgage, you also claim depreciation on the equipment itself. Depending on the asset class, you might be able to claim instant asset write-off or accelerated depreciation, which brings forward the tax benefit. That makes tax effective equipment funding more valuable to a profitable business than one still building revenue.
An example: a logistics operator buys a $90,000 truck on a chattel mortgage. They claim the GST upfront, reduce the loan amount by that credit, then claim depreciation on the full purchase price. If they're in a 25% tax bracket, the depreciation deduction cuts their effective cost by a quarter. Someone leasing the same truck on an operating lease can't claim depreciation, but they can claim the full lease payment as a business expense. The better option depends on profit, tax rate, and whether they want to own the vehicle or upgrade every few years.
Collateral requirements and approval criteria
Most lenders use the equipment itself as collateral. If you're financing office equipment, computer equipment, or industrial equipment leasing, the lender takes a security interest over the asset. If you default, they repossess it. That's why equipment with strong resale value such as vehicles, excavators, forklifts, or tractors is easier to fund than a custom-built production line that only works in your factory.
Some lenders want a director's guarantee or a second security if the equipment is high-risk or you're a new business. Others will lend up to 100% of the invoice price with no additional security if you've been trading for two years and the asset is standard. If you're buying new equipment from a dealer with a buyback arrangement, that can strengthen the application because the lender knows there's a fallback.
How to structure finance around equipment upgrades
If you're upgrading existing equipment every few years, structure matters. A five-year term with a 30% balloon on a chattel mortgage means you owe $30,000 on a $100,000 asset at the end. If the equipment is worth $40,000, you can trade it in, clear the balloon, and use the equity toward the next purchase. If it's only worth $25,000, you're carrying a shortfall.
Operating leases avoid that problem because you hand the equipment back at the end with no residual to manage. That suits businesses that need the latest technology and don't want to hold depreciated assets. If you're financing automation equipment or material handling equipment that becomes outdated quickly, leasing keeps you current without resale risk. If you're buying a grader or a crane that holds value and you'll run it for a decade, ownership through a chattel mortgage or hire purchase makes more sense because you're not paying for flexibility you won't use.
Where to access equipment finance options from banks and lenders
Banks, non-bank lenders, and specialist equipment financiers all offer different structures. Banks tend to offer lower rates but stricter criteria. Non-bank lenders move faster and lend on equipment the banks won't touch. Specialist lenders focus on sectors such as transport, construction, or agriculture and understand the cashflow cycles in those industries, which can mean better terms for seasonal businesses.
A broker who works across multiple lenders can show you options from banks and lenders across Australia without you filling out separate applications. That's useful if you're comparing solar equipment finance, machinery finance, and food processing equipment in the same growth phase. Different lenders price each category differently, and the best rate for one asset type won't be the best for another. If you're funding work vehicles alongside manufacturing equipment, splitting them between lenders might give you a lower blended cost than putting everything with one provider.
Call one of our team or book an appointment at a time that works for you. We'll compare the options that fit your business needs and walk you through the numbers before you commit.
Frequently Asked Questions
What's 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 if registered, and typically includes a balloon payment at the end. Hire purchase spreads the cost with no balloon, but you don't own the equipment until the final payment is made.
Can I claim tax deductions on equipment finance?
Yes, the interest and fees are usually tax deductible. If you use a chattel mortgage, you also claim depreciation on the equipment itself, and depending on the asset class, you might access instant asset write-off or accelerated depreciation.
Do lenders require additional security for equipment finance?
Most lenders use the equipment itself as collateral. Some want a director's guarantee or second security if the equipment is high-risk or you're a new business, but standard assets with strong resale value often get approved with the equipment as the only security.
Is leasing or buying better for equipment that needs regular upgrades?
Leasing suits businesses that want the latest technology and don't want to manage resale or residual values. Buying through a chattel mortgage or hire purchase makes more sense if you'll use the equipment for many years and it holds its value.
How do interest rates differ between equipment types?
Equipment with strong resale value such as vehicles, forklifts, or tractors attracts lower rates than specialised machinery with a smaller secondary market. Lenders also price differently depending on whether the equipment is considered plant and equipment, IT, or vehicles.
