How to Save Money on Equipment Finance

Equipment finance pays for the machinery, vehicles, fit-outs and technology a business earns with, and the cost of it is set by more than the interest rate. The structure decides when GST comes back and who claims the depreciation, the balloon decides what is owed when the asset is tired, and the term decides whether the business is still paying for a machine after it has stopped producing. Each is a choice, and each can be made cheaper.

This guide walks through those choices in the order a business meets them. The examples use an $80,000 machine at an illustrative rate of 7.99% p.a. so the effect of each decision is easy to see; the rate a business is offered depends on the lender, the asset, its age and the business itself.

1. Talk to an Expert Who Knows the Asset Class

Lenders specialise. Some price well on trucks and trailers, some on earthmoving and agricultural machinery, some on medical, fitness or IT equipment, and some will not touch second-hand or private-sale assets at all. The rate, the deposit and the maximum term all move with the asset and its age, and a lender that is expensive for one asset can be the cheapest for another.

A finance broker who works across those lenders matches the asset to the lender that wants it, including low-doc options for a business without two years of financials. Emu Money's finance specialists compare options from 50+ lenders in a few minutes. Complete the get started form and someone will be in touch.

2. Match the Structure to the Asset and Your GST Position

The four common structures differ in who owns the asset, when GST is claimed and what happens at the end. Under a chattel mortgage the business owns the asset from day one, so a business registered for GST can generally claim the GST in the price on its next activity statement and then claim depreciation and the interest component of the repayments. Hire purchase ends in ownership after the final instalment. A finance lease keeps the asset with the financier, treats the payments as an operating expense and claims GST on each payment. An operating lease or rental bundles use of the asset for a set period and hands it back, which suits technology that dates quickly.

Which is cheapest depends on whether the business wants to own the asset, how long it will keep it, how it accounts for GST and whether it can use the depreciation. The comparison below sets the four side by side; an accountant can confirm which suits the books.

3. Use the Tax Rules Without Being Led by Them

From 1 July 2026 the $20,000 instant asset write-off is permanent for small businesses with aggregated turnover under $10 million, under the Treasury Laws Amendment (Tax Reform No. 2) Act 2026. It applies per asset, so several assets under $20,000 can each be written off in the year they are first used or installed ready for use. An asset costing $20,000 or more goes into the small business pool, which is depreciated at 15% in the first year and 30% of the balance in each year after, and a pool balance that falls under $20,000 at the end of the year can be written off in full.

The write-off belongs to the owner of the asset, which means a chattel mortgage or hire purchase rather than a lease, and it brings a deduction forward rather than creating one. Buying equipment the business does not need in order to claim it costs money; buying equipment the business does need and timing the purchase before 30 June so the deduction lands in the current year can save some. Whatever the timing, the asset has to be installed ready for use by the end of the income year, not just ordered.

4. Set the Balloon Against the Asset's Working Life

A balloon, or residual, defers part of the amount financed to a lump sum at the end of the term. It lowers the regular repayment, but interest accrues on the deferred amount for the whole term, so the total cost is higher. In the example below, a 20% balloon on an $80,000 machine over five years cuts the monthly repayment from about $1,622 to about $1,404 and adds about $2,931 in interest.

Equipment holds its value very differently by class. A well-kept excavator or a prime mover can be worth more than a 20% balloon after five years; a computer system or a fit-out is worth close to nothing. Set the balloon below what the asset will realistically sell for at the end of the term, and for assets with no resale market, do not use one.

5. Pay a Deposit, or Trade In, Where Cash Allows

Reducing the amount financed cuts both the repayment and the total interest, and a lower loan-to-value position can improve the rate, particularly on older or specialised equipment where lenders are cautious. A trade-in of the asset being replaced does the same job. On the same $80,000 machine, a 20% deposit saves about $3,461 in interest over five years.

The trade-off is working capital. If the deposit would leave the business short for stock, wages or tax, a smaller deposit and a slightly higher repayment can be the better position.

6. Never Let the Term Outlast the Asset

A shorter term means higher repayments and less interest. On the $80,000 machine at the illustrative 7.99% p.a., a 12 month term costs about $13,799 less than a 60 month term, at more than four times the monthly repayment.

The rule that matters more than the table is that the term should match the asset's productive life. Financing a three-year piece of technology over seven years means paying for a machine that has already been replaced. Lenders apply the same logic in reverse: many cap the term so that the asset's age at the end of the contract stays inside their limit, which is why second-hand equipment often comes with a shorter term and a higher rate.

7. Structure Repayments Around the Cash Cycle

Weekly or fortnightly repayments reduce the balance slightly faster than monthly ones, so a little less interest accrues, and they suit a business paid weekly. The larger saving for a seasonal business is structural: some lenders offer seasonal or stepped repayments, with lower instalments in the quiet months and higher ones after harvest or the peak season, and some allow a repayment holiday while a new machine is being commissioned. A repayment pattern the business can keep in a bad month is worth more than a small interest saving on a pattern it cannot.

8. Keep the Credit File and the ATO Position Clean

Lenders assess the business's credit file, the directors' personal files and the pattern in recent bank statements. Late payments, defaults, a run of credit enquiries and unmanaged tax debt push the rate up or the application out. The ATO can report a business tax debt of $100,000 or more that is overdue by more than 90 days to credit reporting bureaus where the business is not engaging with it; a payment plan that is being kept stops the disclosure. Lodge activity statements on time, clear or arrange any tax debt, and avoid a burst of credit applications in the months before the purchase.

9. Watch the Fees, and the Fine Print on Early Payout

Establishment fees, monthly account fees, direct debit fees, valuation and inspection fees on used assets, and early termination charges all sit outside the headline rate. On a fixed-rate contract, paying out early can trigger a break cost as well as a termination fee, which matters if the business is likely to upgrade the asset before the term ends. Ask for the full fee schedule and the early payout formula before signing, and compare the total cost over the period the business actually expects to keep the equipment.

10. Refinance, or Sell and Lease Back, When the Numbers Say So

Refinancing replaces the current contract with a new one at a better rate, a different term or a structure that suits the business better. It is worth a look when the business's profile has improved since the original application, when market rates have moved (the RBA cash rate rose to 4.35% in May 2026 and was held there in June and August), or when a balloon is falling due and the asset is being kept. A business that owns equipment outright can also raise working capital against it through a sale and leaseback, which can be cheaper than unsecured borrowing when the asset has a strong resale market.

The arithmetic is simple: early termination and break costs on the existing contract, plus establishment fees on the new one, against the interest saved over the remaining term. A finance specialist can model it and check whether a payout, a refinance or a trade-in comes out ahead.

Subject to lender approval, terms, and conditions apply.