Short version: equipment finance lets you get the tools or machine you need now and pay for it from the work it helps you win. For most ABN-holding tradies a chattel mortgage is the best starting point, but the right product depends on how long you’ll keep the gear and what your accountant says about your structure.
Types of equipment finance
Chattel mortgage
You own the equipment from day one and the lender takes security over it until it’s paid off. It’s the most common choice for tradies buying a ute, trailer or plant. If you’re registered for GST, you can generally claim the GST credit on your next BAS, and you may be able to claim interest and depreciation too.
Typical terms: 1–7 years. Rates vary a lot with your credit history, the asset and the lender, so get a few quotes rather than relying on a headline figure.
Commercial hire purchase
The lender buys the equipment and you hire it from them over a set term, then own it once the final payment is made. Repayments can be lower if a final balloon payment is included.
Finance lease
You pay to use the asset for a fixed term and then return it, refinance or buy it at the end. It suits gear that goes out of date quickly or that you like to upgrade often.
What can you finance?
- Hand tools, power tools and workshop equipment
- Utes, vans and trailers (see our ute finance guide)
- Excavators, bobcats and other plant
- Scaffolding, compressors and welding gear
How to compare lenders
- Look at the comparison rate, not just the interest rate. It folds in most fees.
- Check upfront and ongoing fees: application, establishment and monthly account fees.
- Ask about the balloon. A big final payment lowers repayments but leaves a large bill at the end.
- Check early repayment costs in case you want to pay it out when business is good.
- Ask how fast they approve. Some lenders can decide in a day or two, which matters when a deal won’t wait.
What lenders usually ask for
Expect to provide an ABN, ID, recent bank statements and, for larger amounts, tax returns or BAS. Newer businesses can still get approved, but may face a higher rate or need a deposit.
Tax and your accountant
Finance can change how and when you claim deductions, depending on whether you’re a sole trader, partnership or company, and on current ATO rules, including any instant asset write-off threshold. Check the latest rules on the ATO website and talk to your accountant before you sign.
Bottom line
Work out what the equipment will earn you, get at least three quotes, compare on total cost rather than weekly repayment, and keep the term no longer than the useful life of the gear.
Worked example: financing a $40,000 machine
This is an illustration only, not a quote. Say you finance a $40,000 machine over five years at 8% a year with no deposit and no balloon. Repayments would be roughly $811 a month, and you’d pay about $8,660 in interest over the term. A higher rate, fees or a balloon payment change those numbers, which is why you compare the total cost and not just the monthly figure.
Deposit, balloon and term: how they change the cost
- Bigger deposit: lowers the amount you borrow and usually the rate.
- Balloon payment: lowers the monthly repayment, but you owe a lump sum at the end.
- Longer term: lowers the monthly repayment but increases total interest.
Questions to ask a lender
- What’s the comparison rate, and what fees are included?
- Is there an early payout fee?
- Can I make extra repayments without penalty?
- Do you need a personal guarantee?
- What happens if I miss a payment?
Equipment finance for tradies: FAQs
Can I get equipment finance with a new ABN?
Some lenders will approve a newer business, usually with a higher rate or a deposit. Many ask for six to twelve months of trading, so have your bank statements ready either way.
Can a sole trader get equipment finance?
Yes. Sole traders can use chattel mortgages and hire purchase, although the lender will look at your personal credit history as well as the business.
Is it better to lease or buy equipment?
Buying through a chattel mortgage means you own it from day one. Leasing can suit equipment that goes out of date quickly. Your accountant can tell you how each affects your tax.
Will finance affect my tax?
It can change what you claim and when, including GST, interest and depreciation. Check the current ATO rules and talk to your accountant before you sign.
Sources and further reading
- ATO: $20,000 instant asset write-off
- MoneySmart: ASIC’s independent money guide
- ASIC: Australian Securities and Investments Commission
General information only, not financial advice. It doesn’t consider your personal circumstances. Speak with a licensed adviser or your accountant before making decisions. We may earn a commission if you apply through links on this site, at no extra cost to you.