Financing Tools and Vehicles
Buy, finance, lease or hire — the right answer depends on how much the asset earns and how long it stays useful, not on which option feels cheapest. Here's how to work through it before you sign anything.
The ute and the gear are the two biggest cheques most trade businesses ever write, and they usually get decided in a dealership on a Saturday. That's the wrong order. The question isn't which finance product is best — it's whether the asset earns enough to justify owning it at all, and only then how to pay for it in a way your cash flow can carry through a quiet month. This guide covers the utilisation test, the ways to pay and what each one actually means, what a lender looks at, and the costs that never appear in the repayment figure.
Doing this job for a living? See job management in ServiceYak.
Before how you'll pay: does it earn?
Finance turns a large decision into a small monthly number, which is exactly why it's dangerous. A payment you can just about cover in a good month becomes a fixed cost you carry through every bad one.
So run the asset through four questions before you look at a single finance option:
- How often will it actually be used?. Not how often you'd like to use it — how many days last year would you have used it. Anything under about one day a month is a hire, not a purchase, and you'll spend less hiring it ten times than owning it.
- What does it let you charge for?. Either it wins work you can't currently take, or it makes work you already do faster. If it's neither, it's a want. That's allowed, but price it as one.
- How long until it's obsolete or worn out?. Match the term to the life. Financing something over five years that you'll replace in three means paying for a tool you no longer have.
- What does it add to break-even?. Convert the repayment into jobs. "$600 a month" is abstract; "half a job a month, every month, for four years" is a decision. See finding your break-even point.
Hiring has a bad reputation among tradies and it shouldn't. For specialist plant you use a handful of times a year, hire is almost always cheaper once you count storage, servicing, insurance and the capital sitting idle — and you get current gear that someone else maintains.
The ways to pay for it
Products vary between lenders and the names move around, but they come down to a handful of structures. The differences that matter are who owns the thing, who maintains it, and what happens at the end.
| Option | Who owns it | How it ends | Suits |
|---|---|---|---|
| Cash | You, immediately | Nothing to end | Cheap assets, or a business with genuine surplus cash and no better use for it |
| Hire purchase / chattel mortgage | You own it or take title on the final payment | You keep it, sometimes after a balloon payment | Long-life assets you'll keep — vehicles, trailers, major plant |
| Finance or operating lease | The financier | Hand it back, upgrade, or buy it out | Assets you'll replace on a cycle, or want to keep upgrading |
| Secured business loan | You | Repaid over the term, with an asset behind it | Larger purchases where you have security to offer |
| Unsecured business loan | You | Repaid over the term, usually shorter and smaller | Businesses with a solid trading record and nothing to pledge |
| Line of credit / overdraft | You | Revolving — you draw and repay as needed | Smoothing cash flow, not funding a major asset |
| Short-term hire | The hire company | You give it back | Anything used occasionally, or trialled before committing |
Two things are worth knowing before you start ringing around. First, most equipment financiers are only interested in hard assets — vehicles, trailers, machinery, things with a clear resale value. Power tools, computers and fit-outs are usually funded through a general loan or a card instead, if at all. Second, the headline monthly figure is not the comparison. Ask every lender for the total amount payable, the fees, the balloon or residual, and what it costs to exit early.
How each structure is treated for tax differs, and it depends on your business structure and circumstances — which makes it a question for your accountant rather than the dealership finance desk. Ask before you sign, not after: it's a five-minute call, and the answer occasionally changes which product you'd pick.
What a lender is looking at
Approval is mostly about evidence, and the tradies who get the best terms are the ones whose records are already in order. Expect to be asked for:
- Trading history — how long the business has operated, and its recent financials. A newer business isn't disqualified, but the terms reflect it.
- Financial statements and returns, usually a couple of years, prepared by your accountant.
- Bank statements, which is where a messy account that mixes personal and business spending starts costing you.
- The asset itself — make, model, age, condition, and for used gear sometimes an inspection or valuation.
- A personal guarantee, which is common on smaller and unsecured facilities and means you're personally on the hook if the business can't pay.
That last point deserves more thought than it usually gets. A personal guarantee moves the risk out of the business and onto your house. It's often unavoidable, and it's still worth reading properly and knowing exactly what you've signed.
Shop the finance the same way you'd shop the asset. Dealer finance is convenient and rarely the only option — your own bank, a broker and the equipment financiers will each quote differently on the same purchase.
New, used or ex-fleet: the work vehicle
The vehicle is the decision most tradies agonise over, and the honest answer is that all three work — they just fail in different ways.
| New | Used private | Dealer-certified used | |
|---|---|---|---|
| Purchase price | Highest | Lowest | Between the two |
| Depreciation you wear | Steepest, in the first years | Already taken by someone else | Mostly already taken |
| Warranty and downtime risk | Covered, predictable | Yours entirely | Some cover, check exactly what |
| Finance availability | Easiest, often with dealer offers | Lenders fussier about age and condition | Generally straightforward |
| Presentation to clients | Best | Depends entirely on upkeep | Good |
Weigh those against how the vehicle earns. A van that's the entire business and can't be off the road for a week is a different decision from a second ute that carries the trailer. Points worth remembering either way:
- Downtime is the real cost of an unreliable vehicle, not the repair bill. A day off the road is a day of jobs plus the ones you rescheduled.
- Fit-out is not optional and not cheap. Racking, shelving, roof racks, ladder gear, a lockable cage and signage all come after the purchase price.
- Ex-fleet vehicles are high-kilometre but usually well serviced, with records. That's a very different proposition from a private sale with a gap in the log book.
- Presentation is marketing. A clean, signwritten vehicle is one of the cheapest advertising channels a trade business has — see vehicle signage that pays for itself.
- Check the load rating and the fit before the badge. The vehicle that carries your gear legally and comfortably beats the one that looks better parked out front.
Frequently asked questions
Should I buy tools outright or finance them?
Start with utilisation rather than the finance question. Anything used a handful of days a year is cheaper hired, once you count storage, servicing, insurance and idle capital. For gear you'll use constantly, buy or finance it — and match the term to how long you'll actually keep it.
What's the difference between hire purchase and leasing?
With hire purchase you're buying the asset in instalments — it's yours, you maintain and insure it, and you keep it at the end. With a lease the financier owns it, maintenance is often included, and at the end you hand it back, upgrade or buy it out. Which suits depends on whether you want to keep the asset or keep upgrading, and the tax treatment differs — ask your accountant before you sign.
Is it better to buy a new or used work vehicle?
New costs more and takes the steepest depreciation, but comes with warranty and predictable downtime. Used costs less and shifts the reliability risk to you. Dealer-certified used sits between them. If the vehicle is the entire business and can't be off the road, pay for the certainty; if it's a second unit, the savings usually win.
Will financing equipment hurt my cash flow?
It converts a large one-off outlay into a fixed monthly cost, which helps in the short term and raises your break-even permanently. Work out how many extra jobs a month the repayment represents, then check whether a quiet month still clears costs with it in place. If it doesn't, the payment is too big for the business as it stands.