What is equipment finance?
- By Book Keeping Pros
- Sources checked 16 Oct 2026
Definition
Equipment finance is a general name for the ways a business pays for vehicles, machinery, tools and other equipment over time instead of all at once. It takes in loans used to buy equipment, hire purchase, chattel mortgages and leases. Each is a different kind of agreement, and the kind affects what is recorded in the books.
Because equipment finance is an umbrella term rather than one product, the first bookkeeping step is to read the agreement and work out which kind it is. The agreement names the finance provider, the item, the payments and what happens at the end, and those details decide which accounts are used. Your accountant can say how each agreement is treated.
A business with several items on finance is helped by a short register of its agreements: the provider, the item, the type of agreement, the start and end dates, the regular payment and any larger final payment. Checked each month, the register shows whether every payment has been entered and lets each balance in the books be matched to, or explained against, the provider's statement.
Finance payments usually run for the length of the agreement, so they belong in the cash flow forecast until the end date, along with any final payment. The register makes those dates easy to find.
In Australia
business.gov.au's guide to choosing funding suggests that a business needing to replace or buy vehicles, tools or equipment first weigh up whether to buy or to lease.
The same guide includes equipment leases and asset financing among the products that banks, credit unions and building societies offer. It describes non-bank lenders as finance companies without a banking licence, and notes that some of them concentrate on particular kinds of lending, such as vehicle or equipment finance.
Its guidance on whether to lease or buy equipment says maintenance and repairs of leased equipment are usually the leasing company's responsibility, and that a lease may have to be paid for its whole term even after the equipment stops being needed.
Worked example
| Item | Agreement | Ends | Monthly payment (AUD) | Final payment (AUD) |
|---|---|---|---|---|
| Delivery van | Chattel mortgage | 30 Jun 2029 | 820.00 | 9,500.00 |
| Forklift | Hire purchase | 31 Mar 2028 | 640.00 | None |
| Office printer | Lease | 30 Sep 2027 | 95.00 | None |
| Espresso machine | Loan | 31 Dec 2027 | 410.00 | None |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Entering every equipment finance agreement the same way without first checking which kind of agreement it is.
- Keeping no list of finance agreements, so end dates and final payments are missing from the cash flow forecast.
- Filing the agreement with general paperwork instead of with the records for the item it pays for.
Related terms
Related service
Small business bookkeeping
Your books kept current, every month.
Sources
- Choose your funding
business.gov.au, Australian Government. Current at 16 October 2026, released 18 February 2026. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Leasing or buying vehicles and equipment
business.gov.au, Australian Government. Current at 16 October 2026, released 23 October 2024. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.