Business, truck and equipment finance, explained
When a business buys a vehicle, a truck or a piece of equipment, there are several ways to finance it, each with different ownership, tax and cash-flow effects. This guide demystifies the four common structures so you can talk to your accountant with the vocabulary already in hand.
Four common structures
Equipment and vehicle finance for a business is usually arranged as one of the following. The right choice depends on whether you want to own the asset, how you want it treated on your books, and your cash flow. This is an area where a registered tax agent or accountant earns their fee, so treat the summaries below as a starting map, not the destination.
| Structure | In plain English |
|---|---|
| Chattel mortgage | You own the asset from day one and the lender takes a mortgage over it as security. Common for vehicles and plant used mainly for business. |
| Hire purchase | The financier owns the asset while you hire it and make payments, and ownership passes to you once the final payment is made. |
| Finance lease | The financier owns the asset and leases it to you for an agreed term. You use it and pay rentals, with options at the end of the lease. |
| Operating lease | A shorter-term rental where you use the asset without the risks of ownership and hand it back at the end. Often used to keep equipment current. |
Ownership and tax differ by structure. Who owns the asset, how depreciation and interest are treated, and how goods and services tax applies all vary between these products. Because it affects your tax position, confirm the treatment with a registered accountant or the Australian Taxation Office before deciding.
Truck and transport finance
Trucks and heavy transport are financed with the same structures, often over terms that reflect the working life of the vehicle. Lenders look closely at the age and type of the truck, the operator's experience and the health of the business, because a heavy vehicle is a serious asset and a serious commitment.
What lenders assess for a business
- Business financials. Turnover, profitability and existing debts show whether repayments are sustainable.
- Trading history. How long the business has operated, and its track record, both matter.
- The asset. Its value, resale prospects and how essential it is to earning income.
- Security and guarantees. The asset is typically security, and directors may be asked to guarantee the finance.
What to compare
- The total cost over the full term, including fees, not just the monthly figure
- Any balloon or residual due at the end, and how you will meet it
- Whether early payout is allowed and what it costs
- How the structure interacts with your tax position, confirmed with your accountant
General information only. This guide explains how a product works in Australia. It is not financial, credit or legal advice and does not consider your personal situation. Rates, fees and criteria vary by lender and change often, so confirm current terms with the provider and read the product documents. Free independent help is available from the Australian Government at moneysmart.gov.au.
Equipment finance estimator
Estimate only. Assumes a fixed rate and equal monthly repayments over the full term. It ignores fees, charges and the comparison rate, so real repayments will differ. Not a quote or an offer.
This estimator ignores tax effects and balloon payments, which matter a great deal for business finance. Use it only to feel how term and rate move the monthly figure.