A finance quote looks simple. A weekly or monthly figure sits at the top and the rest is fine print. But that headline number is only one of several variables, and two quotes with the same repayment can have very different total costs. If you can read the sheet properly, you can compare offers on equal terms.
Start with the amount financed
The amount financed is not always the price of the equipment. It might include delivery, registration, installation, a lender fee or an insurance product rolled into the loan. Check what is in there and what is not. If you are paying a deposit or trading something in, make sure it has been deducted correctly.
A good habit is to line up three numbers: the supplier's invoice price, any deposit you are contributing, and the amount financed. They should reconcile. If the difference is not obvious, ask what the extra items are.
The rate, and what it leaves out
The interest rate tells you the cost of borrowing before fees. A comparison rate adds certain fees and charges into one figure so offers can be compared more fairly. It is calculated on set assumptions, so it will not match every deal perfectly, but a large gap between the rate and the comparison rate is a sign that fees are doing some heavy lifting. ASIC's MoneySmart explains comparison rates in general terms and is worth a read before you sign anything.
Also ask whether the rate is fixed for the whole term. Most equipment finance is fixed, but it is better to confirm than assume.
Fees to look for
Common charges include:
- an establishment or application fee
- a monthly account-keeping fee
- a documentation or security registration fee
- early repayment or break costs
- late payment fees
None of these are unusual. What matters is that you can see them and add them up. If the quote does not list fees, ask for a schedule in writing.
Term, balloon and the repayment
Term is the length of the agreement. A longer term lowers the repayment but usually raises total interest. A balloon is a lump sum due at the end, and it also lowers the regular repayment while leaving a bill to settle later.
Here is an illustrative example only, using a rate of 8.5% per year and no fees, so the real comparison rate would be higher:
| Amount financed | Term | Balloon | Approx. monthly repayment | Approx. total interest |
|---|---|---|---|---|
| $50,000 | 5 years | None | $1,026 | $11,540 |
| $50,000 | 5 years | $15,000 | $824 | $14,450 |
The balloon version feels cheaper each month, but costs more overall and leaves $15,000 to be paid, refinanced or covered by selling the asset. Neither option is right or wrong. The point is to see the trade-off in numbers rather than just the monthly figure.
Ask who owns what
Is this a chattel mortgage, where you own the asset and the lender holds security? Or a lease, where the lender owns it? That difference changes end-of-term options and tax treatment. We lay out the main differences on our chattel mortgage vs lease page. For tax questions, the ATO has business asset guidance, and your accountant should confirm what applies to you.
Check the conditions
Some quotes are conditional on things like a satisfactory credit check, a valuation of the asset, insurance in the lender's name, or a minimum trading history. A quote is not an approval. If something is subject to approval, it can change.
A simple comparison routine
When you have two or more quotes, put them in a table with these rows: amount financed, term, balloon, rate, comparison rate if provided, total of all repayments, and total fees. The total of all repayments, plus any balloon, minus the amount financed, gives you the approximate total cost of credit. Whichever quote gets the lowest total for a term and structure that suits your cash flow is usually the better starting point, but weigh flexibility too. A deal that lets you make extra repayments may be worth more to you than one that is a few dollars cheaper per month.
Don't be rushed
A quote that expires in an hour is a red flag. Reasonable lenders understand that you want time to read the document and run it past your accountant. If you feel pressured, step back.
Takeaway
Treat the quote like a spec sheet: read every line, reconcile the numbers, and compare total cost as well as repayment. This article is general information only and does not take your circumstances into account. Rates and fees vary by lender, and nothing here is a guarantee of approval or of any particular price.
