Every business owner buying a truck, excavator, or trailer faces the same question: should I lease it or buy it outright? The answer depends on your cash flow, tax position, and how long you plan to keep the asset.
This guide covers the main finance options available to Australian businesses — chattel mortgages, finance leases, operating leases, and rent-to-own — with real-world examples so you can make an informed decision.
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Finance structures
GST
Treatment varies
$150K
Instant write-off cap
Free
No obligation quotes
Chattel Mortgage — You Own It From Day One
A chattel mortgage is the most common way Australian businesses finance equipment. The lender provides the funds, you take ownership immediately, and you repay the loan over a fixed term (typically 2-5 years) with a balloon/residual payment at the end.
How It Works
You purchase the equipment and the lender takes a "mortgage" (security interest) over the asset. You own it from day one, it goes on your balance sheet, and you can claim depreciation and interest as tax deductions.
Tax Treatment
GST claimed upfront
You can claim the full GST on the purchase price in your next BAS, improving cash flow immediately.
Depreciation deductions
Claim depreciation on the asset over its effective life. For trucks, the ATO allows 8 years; for earthmoving equipment, 6-10 years depending on the type.
Interest deductions
The interest component of your repayments is tax deductible as a business expense.
Best For
Businesses that want to own the asset, claim GST upfront, and take advantage of depreciation. Ideal if you plan to keep the equipment for its useful life (5+ years) and want the lowest total cost of ownership.
Example
You buy a $180,000 prime mover via chattel mortgage over 4 years with a 30% residual ($54,000). Monthly repayments are approximately $3,200. You claim the full $16,364 GST on your next BAS, deduct interest each year, and depreciate the asset. At the end of the term, you pay the $54,000 residual and own the truck outright — or refinance, trade, or sell.
Finance Lease — Use It Now, Decide Later
A finance lease is similar to a chattel mortgage but with a key difference: the lender owns the asset during the lease term. You have full use of the equipment and are responsible for maintenance, insurance, and running costs.
How It Works
The lender purchases the equipment and leases it to you for a fixed term. At the end, you have three options: pay the residual value and take ownership, re-lease the equipment, or hand it back.
Tax Treatment
Lease payments are generally tax deductible as a business expense. However, you cannot claim GST upfront on the purchase price — instead, GST is included in each lease payment. You also cannot claim depreciation since you don't technically own the asset.
Best For
Businesses that want flexibility at the end of the term. Good for equipment that depreciates quickly or that you may want to upgrade before the end of its useful life. Also suits businesses that prefer off-balance-sheet financing.
Operating Lease — Keep It Off the Books
An operating lease is essentially a long-term rental. You use the equipment for a fixed period, make regular payments, and return it at the end. You never own it.
How It Works
The lessor retains ownership and takes on the residual value risk. Your payments are lower than a chattel mortgage because you are only paying for the use of the asset, not its full value.
Tax Treatment
The entire lease payment is tax deductible as an operating expense. The asset stays off your balance sheet, which can improve your debt-to-equity ratio — useful if you are applying for other finance or government contracts.
Best For
Businesses that upgrade equipment frequently (every 2-3 years), want lower monthly payments, or need to keep assets off the balance sheet. Common for fleets of trucks or light commercial vehicles.
Rent-to-Own — Try Before You Commit
Rent-to-own lets you use the equipment immediately while paying it off over time. A portion of each rental payment goes toward the purchase price.
How It Works
You rent the equipment and a percentage of each payment builds equity toward ownership. At the end of the agreement, you own the asset. Some agreements allow you to buy out early.
Best For
Businesses that need equipment immediately but want to spread the cost. Also good for businesses that want to test a machine on a real job before committing to full ownership. Common for excavators, loaders, and skid steers.
Side-by-Side Comparison
| Feature | Chattel Mortgage | Finance Lease | Operating Lease | Rent-to-Own |
|---|---|---|---|---|
| Ownership | You from day 1 | Lender until residual | Lender always | You at end of term |
| GST claim | Upfront (full) | Per payment | Per payment | Per payment |
| Depreciation | Yes | No | No | Yes (at end) |
| Balance sheet | On | On | Off | On |
| Best for | Long-term ownership | Flexibility | Frequent upgrades | Try before you buy |
Instant Asset Write-Off — What You Need to Know
Under the Australian Government's instant asset write-off scheme, eligible businesses can immediately deduct the full cost of assets up to the threshold (currently $150,000 for small businesses, but check the ATO for current limits as these change regularly).
This can make buying outright via chattel mortgage significantly more attractive in a given financial year — especially for equipment under the threshold. However, you still need the cash flow to cover repayments, and the write-off only benefits you if you have enough taxable income to offset.
Important: Always consult your accountant before making finance decisions based on tax treatment. Rules change and individual circumstances vary.
How to Decide: Three Questions to Ask
How long will you keep it?
5+ years = buy (chattel mortgage). 2-3 years = lease. Unsure = rent-to-own.
Do you need it on or off balance sheet?
Off balance sheet = operating lease. On balance sheet is fine = chattel mortgage or finance lease.
Can you use the GST and depreciation now?
High taxable income + registered for GST = chattel mortgage gives the biggest upfront benefit.
Get a Free Finance Quote
Not sure which structure is best? Equifund Financial Group provides free, no-obligation quotes across all finance types — chattel mortgage, finance lease, operating lease, and rent-to-own. They work with a panel of lenders to find the best rate for your situation.
Browse equipment on Asset Scanner, find what you need, and apply for finance directly from the listing page. Most applications receive a response within 24 hours.