The right finance structure for earthmoving equipment depends on how long you will keep the machine and how much cash you want to hold back. Get that choice right and the repayments can sit comfortably alongside the work the machine brings in.
This guide is for NSW contractors and business owners who have found a machine and now need to decide how to pay for it.
How Does Earthmoving Equipment Finance Work?
Earthmoving equipment finance is a loan or lease where the machine itself is the security for the debt. You pay it off over a set term, usually through regular repayments, while the machine earns income for your business.
Because the asset backs the loan, equipment finance is often arranged separately from your property or overdraft. Equipment finance is usually secured over the machine. Some lenders also require a personal guarantee or additional security, and sole traders are personally liable for the debt. Check this with the lender before you sign, because it affects your personal risk.
The same approach applies across excavators, backhoes, loaders, skid steers, graders and dozers. Whether you are buying new or used, a lender will want to know what the machine is worth and how long it will keep that value.
Which Finance Structure Suits an Excavator Purchase?
The main options are a chattel mortgage, hire purchase and a finance lease, and the right one depends on whether you want to own the machine and how you want to handle the end of the term. Each has a different ownership setup and different trade-offs.
With a chattel mortgage, you take ownership of the machine from day one and the lender holds a mortgage over it until the loan is repaid. Hire purchase works differently, because ownership usually passes to you after the final payment. With a finance lease, the lender owns the machine and you pay to use it, which can suit operators who like to upgrade regularly but means you do not build equity in the asset.
How each structure is treated for tax and GST differs, so speak with your accountant before you choose. Your broker can compare lenders on rate and fees, but your accountant should confirm the tax side.
For a wider view of how these products fit with your other borrowing, our asset finance and business loans pages explain the differences.
How a Balloon Payment Changes Excavator Repayments
A balloon payment lowers your regular repayments by leaving a lump sum to pay at the end of the term. The trade-off is that you still owe that lump sum when the loan finishes, and you will usually pay more interest overall.
As an illustration, consider a NSW civil contractor financing a used excavator priced at $120,000 over five years. This example uses an illustrative rate of 6.75% p.a. and is not a current offer.
With no balloon, repayments would be about $2,362 a month. If the contractor chose a $24,000 balloon (20% of the price), repayments would drop to about $2,025 a month. That is roughly $337 a month back in the business, which could cover fuel or wages while a new contract ramps up.
At the end of year five, the contractor owes $24,000. They can pay it from cash, refinance it, or sell or trade the machine. If the excavator is worth less than expected by then, the shortfall comes out of the business. The contractor in this scenario decided the lower monthly cost suited the work pipeline, and set aside money each month towards the balloon.
The figures are illustrative only. Your actual repayments will depend on your lender, deposit, the machine's age and your business profile.
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What Do Lenders Look at When Financing Heavy Equipment?
Heavy equipment lenders mainly look at the machine, your business income and your history of managing debt. A clear picture of each can speed up an application.
On the machine side, lenders usually consider its age, condition, hours of use and whether it is new or second-hand. Older machines or those with high hours can mean a shorter term or a higher rate, depending on the lender.
On the business side, they assess whether your income can support the repayments. Operators with a long trading history and recent financials are often assessed more easily than those who have just started. New businesses can still get approved, but may need a larger deposit or extra evidence of work coming in. Your borrowing capacity across all your debts also matters, since existing loans reduce what a lender will offer.
The sale contract or a supplier quote is normally needed so the lender can see exactly what is being bought and from whom. Private sales can be financed too, though some lenders ask for extra checks on the machine and seller.
Which Costs Should You Budget for Beyond the Purchase Price?
The purchase price is only part of what an earthmoving machine costs to run, so your budget should include transport, insurance, servicing and attachments. These costs can change whether the repayments are truly affordable.
Moving a machine between NSW job sites may need a float or a heavy vehicle, and licence requirements depend on the vehicle and load, so check Transport for NSW or Service NSW requirements. Buckets, hammers and other attachments may be priced separately from the machine, so check whether your quote includes them. Ask your lender whether attachments can be included in the same facility.
Insurance matters because the lender will usually expect the machine to be covered while the debt exists. Our insurance page outlines cover options to discuss alongside your finance. Ongoing servicing and repairs also come out of your cash flow, particularly on older second-hand machines, so leave room for them in your repayment plan.
A machine that is financed but sits idle still has to be paid for each month. Before you commit, check that the work you have lined up would cover repayments if a few weeks were slow.
If you are buying an excavator, grader or loader, talk to us before you sign a contract. Call one of our team or book an appointment at a time that works for you, and we will compare lenders and structures against your plans for the machine.
Frequently Asked Questions
What are the main ways to finance an excavator in NSW?
Chattel mortgages, hire purchase and finance leases are the main options. Which one suits you depends on whether you want to own the machine from day one and how you want to handle the end of the term. Speak with your accountant about the tax treatment of each.
Does a balloon payment reduce the cost of financing earthmoving equipment?
It lowers your regular repayments but leaves a lump sum due at the end of the loan. You will usually pay more interest overall, and you need a plan to pay, refinance or sell the machine when the balloon falls due.
Can I finance a second-hand earthmoving machine?
Yes, many lenders finance used machines, including some private sales. Age, hours of use and condition can affect the term and rate you are offered.
What costs should I budget for besides the repayments?
Allow for transport between sites, insurance, servicing, repairs and any attachments not included in the machine's price. These ongoing costs affect how affordable the repayments really are.
