Equipment Leasing or Financing: Which Is Right for Your Business?

Nov 18, 2025

When it comes to acquiring business equipment, two common paths are leasing and financing. Both offer flexible alternatives to paying upfront, but each suits different needs depending on your cash flow, tax goals, and long-term plans.

So how do you decide between leasing and financing? Let's explore the differences, benefits, and key considerations for Australian Businesses.

Equipment Financing (Chattel Mortgage or Commercial Loan):

You borrow funds to purchase the equipment, which you own from day one. The asset typically serves as loan security.

Benefits of Equipment Financing:

Asset Ownership: You gain full ownership once the loan is repaid, giving you long-term value.
Tax Deductions: You can typically claim depreciation and interest expenses.
GST Input Credits: You may be able to claim GST on the asset price upfront.
Customisable Terms: Loans can be structured around your cash flow, with flexible terms and balloon payments.

Choose Equipment Finance if You:

Want to own the asset long term.
Have predictable cash flow to manage repayments.
Are purchasing durable assets like vehicles, trailers, or construction machinery.

Equipment Leasing (Operating or Finance Lease):

You rent the equipment for a set period, with the lender retaining ownership. At the end of the lease, you may return the asset, extend the lease, or purchase it for a residual value.

Benefits of Equipment Leasing:

Lower Initial Outlay: Leasing often requires no deposit, freeing up capital.
Tax-Deductible Payments: Lease payments are usually fully deductible as an operating expense.
Easy Upgrades: Ideal for rapidly evolving tech or equipment with a short lifecycle.
No Ownership Risks: The lender bears depreciation and resale risk.

Choose Leasing if You:

Want to avoid tying up cash in depreciating assets.
Frequently upgrade equipment.
Need a fully deductible expense structure for tax planning.

Factors to Consider

Asset Lifespan: Is the equipment likely to remain useful beyond the lease term?
Tax Strategy: Which option offers better deductions for your business structure?
Cash Flow: Can you manage higher repayments for ownership, or prefer smaller, ongoing lease costs?

Exit Options: Do you want flexibility to return or upgrade the equipment?

Feature	Equipment Financing	Equipment Leasing
Ownership	You own the asset from the start or end of the loan term.	Lender owns the asset; optional purchase at lease end.
Upfront Costs	May require a deposit or balloon payment.	Usually no deposit required.
Monthly Repayments	Fixed repayments (may be higher than lease payments).	Generally lower, treated as rental expenses.
Tax Treatment	Claim depreciation and interest on loan.	Lease payments often fully deductible.
GST Treatment	GST on asset claimable upfront if eligible.	GST typically applied to each lease paymemt.
Best For	Long term use of durable equipment.	Short term use or equipment that rapidly depreciates.
Upgrade Flexibility	Less flexible; you own the asset.	Easier to upgrade or return at end of lease.
Residual Risk	You bear risk of depreciation and resale.	Lender bears residual risk.