01
The residual value at the end of the term
Not the value today. This is why a machine’s age at the end of the term matters more than its age at purchase, and why terms shorten as equipment ages.
Guide
How equipment finance actually works in New Zealand.
The foundation the machine pages build on. What is being secured, who owns what during the term, why the pricing sits below unsecured lending, and what happens when the term ends.
MS
Matt Stiles Editor
Published 7 September 2026 Last reviewed 7 September 2026 Read time 12 min
The short version
Five things that explain most of it.
- The machine is the security. A lender takes an interest in an identified asset rather than in property, and registers it on a public register. That is what separates this from unsecured business lending on price.
- The structures differ on ownership, not on the machine. Hire purchase ends in ownership, a finance lease defers a residual, an operating lease hands the machine back. Which one fits depends on how long the business will keep it.
- The term is set by the machine’s remaining life. Lenders look at the machine’s residual value at the end of the term rather than its value today, which is why an older machine attracts a shorter term at the same price.
- The tax follows the structure. GST timing and the depreciation claim both depend on who is treated as owning the asset, subject to the accountant’s confirmation in every case.
- The end of the term is part of the decision. A term running past the point a machine will be replaced means paying for something already traded, which is the most common avoidable mistake in this product.
Start here
What is actually being financed.
Equipment finance is lending against a specific, identifiable asset. That specificity is the whole basis of the product. A lender writing an unsecured business loan has a promise to repay and nothing else; a lender writing equipment finance has a machine with a serial number, a location, a resale market and a public register recording its interest in it.
That interest is registered on the Personal Property Securities Register, run through the Companies Office. Registration is what makes the security effective against the world rather than only against the borrower, and it is why a search of that register is the first step in any used equipment purchase. A registered interest attaches to the goods rather than to the person selling them.
Everything else about the product follows from that. Pricing sits below unsecured lending because the lender’s downside is smaller. Terms are set by how long the machine will hold value rather than by how long the business wants to pay. Deposits appear where the machine is harder to sell. And the structures differ mainly in who is treated as the owner while the debt is outstanding.
What is secured
One identified machine
Who registers it
The financier
Where
The PPSR
Cost of a search
A published fixed fee
The four structures
What genuinely differs between them.
The machine does not change. What changes is ownership during the term, where the asset sits in the accounts, when the GST falls and what happens at the end.
| Hire purchase | Chattel mortgage | Finance lease | Operating lease | |
|---|---|---|---|---|
| Who holds title in the term | The financier, transferring at the end | The business, from the start | The financier | The financier |
| On the balance sheet | As an asset from day one | As an asset from day one | Depends on the accounting treatment | Commonly not |
| Depreciation claim | Ordinarily the business | Ordinarily the business | Depends on the arrangement | Ordinarily the financier |
| GST on the purchase | Generally claimable up front | Generally claimable up front | Depends on the arrangement | Typically on each rental |
| At the end of the term | The business owns it | The business owns it | Residual settled, refinanced or returned | The machine goes back |
| Suits | Keeping the machine long term | Keeping the machine long term | Replacing on a cycle | Uncertain utilisation or fast obsolescence |
How the four common New Zealand equipment finance structures differ. Tax treatment in every case is subject to the accountant’s confirmation.
The distinction that matters
Own it at the end, or hand it back.
Structures that end in ownership
Hire purchase and chattel mortgage.
Both put the machine on the business’s balance sheet from day one and leave it there. The difference between them is largely technical: under a hire purchase the financier holds title until the final payment, while under a chattel mortgage the business holds title from the outset and grants the financier a mortgage over it.
In both, the business is ordinarily treated as the owner for tax purposes, which means the depreciation claim sits with it and a GST-registered business is generally able to claim the GST on the full purchase price in the return covering the period the agreement begins, subject to the accountant’s confirmation of the accounting basis used.
What the business takes on is the resale risk. If the machine is worth less at the end than expected, that is the business’s problem, and if it is worth more, that is the business’s gain.
Structures that do not
Finance lease and operating lease.
A finance lease sets a residual amount at inception that is not repaid across the term, which lowers the payment and defers a decision. At the end the residual is settled, refinanced, or the machine is returned. An operating lease goes further and is closer to a long rental, with the machine going back and the financier carrying the resale exposure.
The tax treatment follows ownership, so under an operating lease the depreciation claim ordinarily stays with the financier and the business claims the rental as an expense instead, again subject to the accountant’s confirmation on the specific arrangement.
These structures earn their place where the machine will not be kept. Technology hardware replaced every three years and equipment in premises the business may not hold for the full term are both cases where handing the asset back is doing something useful rather than costing something.
What sets the term
Five things a lender weighs before offering a term.
02
How many buyers exist for it
A mainstream forklift has hundreds of plausible New Zealand buyers. A specialised production machine has a dozen. The second attracts a shorter term and a larger deposit for that reason alone.
03
The trading history behind the payments
Twelve months of bank statements is the common starting point, with financial statements added on larger amounts and in sectors where seasonality makes statements alone a poor picture.
04
Total existing commitments
A new facility is assessed against everything already owed rather than against the new machine alone, which is what binds first in businesses that finance several machines.
05
Whether the purpose is visible
A named contract or a displaced subcontract spend gives the repayment a source a lender can see. It does not guarantee an outcome and it changes the conversation.
06
What deposit is on offer
A deposit reduces exposure and typically improves the indicative rate. A trade-in commonly serves as one, provided it clears the balance on the machine being traded.
Tax
Two claims, both following ownership.
Under a structure where the business is treated as the owner, which is the ordinary position under a hire purchase or chattel mortgage, a GST-registered business is generally able to claim the GST on the full purchase price in the return covering the period the agreement begins rather than spreading it across the payments, and the depreciation claim ordinarily sits with the business at the rate Inland Revenue publishes for the applicable asset category. Under an operating lease the GST is typically claimed on each rental as it is invoiced and the depreciation ordinarily stays with the financier, again subject to the accountant’s confirmation. The treatment depends on the accounting basis, the specific arrangement and the asset category, and the accountant is the person with all three.
Worked scenarios
The same $80,000, three different ways.
Illustrative scenarios on stated assumptions, showing how the structure rather than the machine changes the outcome. Figures are indicative and come from the calculator on this page.
A machine the business will keep for a decade
Hire purchase over four years
On these assumptions an $80,000 amount financed at an indicative 11% over 48 months carries a repayment near $477 a week, and the business owns the machine outright at the end.
The GST on the purchase is generally claimable in the return covering the period the agreement begins and the depreciation claim sits with the business, both subject to the accountant’s confirmation. Six years after the term ends the machine is still working and costing nothing.
Indicative figures
- Amount financed
- $80,000
- Term
- 48 months
- Indicative weekly
- ~$477
- At the end
- Owned outright
A machine replaced on a four-year cycle
Finance lease with a residual
The same $80,000 machine on a finance lease with a residual set at inception carries a lower weekly payment, because part of the value is not being repaid across the term.
At the end the residual falls due and is settled, refinanced or the machine returned. The lower payment is not a saving; it is a deferral, and the business is choosing to decide later rather than to pay now.
Indicative figures
- Amount financed
- $80,000
- Residual
- Set at inception
- Weekly payment
- Lower
- At the end
- A decision falls due
Equipment that will be handed back
Operating lease
On an operating lease the machine goes back at the end and the financier carries the resale exposure. Payments frequently bundle servicing, which makes budgeting simpler.
Nothing is owned at the end, which is the cost of not carrying the risk. Where the business genuinely intends to replace the equipment anyway, that is a benefit rather than a cost, because the term and the replacement coincide by construction.
Indicative figures
- Machine value
- $80,000
- Resale exposure
- The financier’s
- Servicing
- Sometimes included
- At the end
- Nothing owned
The sequence
How a facility comes together.
01
The machine is identified and quoted
Asset finance is written against specific equipment, so a quote naming make, model, year, serial number and condition is what opens a file. Pre-approval without a machine is possible with some lenders and is commonly re-priced once the actual unit is known.
02
The business and the register are checked
Trading history is assessed alongside the machine, and a search of the Personal Property Securities Register runs on any used purchase. Where an existing interest is found, the usual path is for the seller’s finance to be settled from the purchase price at the moment ownership transfers.
03
Terms are offered, accepted and settled
On acceptance the financier commonly pays the seller directly rather than paying the business, and registers its own security interest. Insurance naming the financier is normally a condition of settlement, and the first payment usually falls a month afterwards.
Honest assessment
When financing equipment makes sense, and when it does not.
Where it fits
- The machine will be used enough to justify owning rather than hiring it
- Working capital has better uses than being converted into plant
- The equipment has a real resale market, which is what keeps the pricing low
- The term matches how long the machine will actually be kept
- The tax position has been confirmed with the accountant before signing
Where it does not
- Utilisation is low or seasonal, where hire commonly costs less across a year
- The amount is small enough that establishment fees outweigh the rate advantage
- The equipment is old enough that only unsecured funding is available anyway
- The business is very new and the terms available make the purchase expensive
- The machine will be replaced before the term ends
Test the maths
The arithmetic behind every structure above.
The amortising calculation is the same whichever structure is used, though a lease with a residual amortises only part of the value. Indicative only, and not a quote or offer of credit.
Indicative repayment
Weekly
$477/week
$2,068 /month $19,247 total interest
$80,000
$5,000 $500,000
4 years
6 months 5 years
11.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $80,000 scenario
4 years at 11.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
Method
How this guide was written.
Everything here is drawn from New Zealand primary sources rather than from other finance publishers. The security mechanics come from the Personal Property Securities Act 1999 and the register the Companies Office operates. The tax positions come from Inland Revenue’s published guidance, and are stated with the accountant’s confirmation attached because the treatment depends on facts a website cannot see.
Rate bands are described as indicative because that is what they are. No rate on this site is available on request, and no figure here is a quote. What a specific business is charged is a function of its trading history, the machine, any deposit, the term and the lender’s credit assessment, and only the lender sees all five together.
References
Sources
- Personal Property Securities Act 1999
The statutory basis for how a security interest attaches to goods and how it is enforced.
- Personal Property Securities Register
The register itself, and the published search and registration fees.
- Inland Revenue, GST
The published source for the GST timing described under each structure.
- Inland Revenue depreciation rate finder
The published source for the depreciation treatment referred to throughout.
- Reserve Bank of New Zealand, statistics
Context for the indicative rate bands referred to on this page.
- Financial Markets Authority, financial advice
Backs the distinction drawn between class information and regulated financial advice.
FAQ
Questions, answered
What is the difference between hire purchase and a chattel mortgage?
Largely technical. Under a hire purchase the financier holds title until the final payment transfers it; under a chattel mortgage the business holds title from the outset and grants the financier a mortgage over the goods. In both, the business is ordinarily treated as the owner for tax purposes and the machine sits on its balance sheet from day one.
Why is equipment finance cheaper than an unsecured business loan?
Because the lender holds an identified asset it can recover and resell if payments stop, which lowers its exposure. The size of the difference depends on how liquid the resale market for that class of equipment is, so a mainstream forklift typically prices better than a specialised production machine for the same borrower.
What is the PPSR and why does it matter?
The Personal Property Securities Register records security interests in goods. Registration makes an interest effective against the world rather than only against the borrower, and an interest attaches to the goods rather than to the person selling them. That is why a search is the first step in any used equipment purchase.
How is the term decided?
By the machine’s residual value at the end of the term rather than its value today. A lender is asking how quickly it could sell the asset and for how much at the point the facility ends, which is why age caps are expressed as the age reached at the end of the term and why older equipment attracts shorter terms at the same price.
Is a deposit always required?
No. Nil-deposit facilities are common on newer equipment for businesses with a reasonable trading history. Deposits appear where the machine is older, more specialised or harder to resell, or where the business is newer. A deposit reduces the lender’s exposure and typically improves the indicative rate offered.
When is the GST claimable?
Under a hire purchase or chattel mortgage, a GST-registered business is generally able to claim the GST on the full purchase price in the return covering the period the agreement begins rather than across the payments, subject to the accountant’s confirmation of the accounting basis used. Under an operating lease the GST is typically claimed on each rental as it is invoiced, again subject to the accountant’s confirmation.
Who claims the depreciation?
Ordinarily whoever is treated as the owner. Under a hire purchase or chattel mortgage that is normally the business, at the rate Inland Revenue publishes for the applicable asset category. Under an operating lease the financier ordinarily retains ownership and the depreciation claim with it, and the business claims the rental as an expense instead. All of this is subject to the accountant’s confirmation.
What happens at the end of the term?
Under a hire purchase or chattel mortgage the business owns the machine outright. Under a finance lease the residual is settled, refinanced or the machine returned. Under an operating lease the machine goes back. Planning for that moment before signing is what prevents a term that outlives the machine’s usefulness to the business.
Can several machines be financed on one facility?
Commonly yes, particularly where they are one purchase from one supplier, which is how fit-outs and equipment packages are usually funded. Separate facilities let each term match the asset behind it. One facility is simpler to administer and ties the assets together, which can mean a default on one reaches the others.
What happens if the business cannot make the payments?
The financier can enforce its registered security interest under the Personal Property Securities Act 1999 and take possession of the equipment, which is then sold and the proceeds applied to the debt. Where the sale raises less than the balance owing, the shortfall commonly remains payable by the business and by any guarantor.
Is a personal guarantee normal?
It is common on smaller facilities and in sectors with higher failure rates, and it is a separate obligation that survives the company’s position. Where a sole trader’s borrowing is wholly or predominantly for personal use, the Credit Contracts and Consumer Finance Act can also apply, which is a narrower case but not an impossible one.
Can this site tell me what rate I will get?
No, and no publisher can. The rate is a function of trading history, the machine, any deposit, the term and the lender’s credit assessment together, and only the lender sees all of those. The bands on this site describe a market rather than an offer, and the calculator answers a different and earlier question.
Related
Keep reading
What equipment lenders assess
The application side of what this guide describes.
Read onNew against used equipment finance
Why age caps shorten terms, and what that costs.
Read onPlant and machinery depreciation
The tax side, in detail.
Read onEnd of term and upgrade options
What happens when the term ends and the machine is still there.
Read onEquipment finance by machine
How all of this applies to eleven specific classes of machine.
Read on