Asset Finance Calculator

An asset finance repayment calculator for equipment, vehicles and machinery. Use it as an asset loan calculator for a chattel mortgage or a lease: enter the amount, the term, the rate and the residual, and it works out the repayment. The residual is the number most people get wrong, and there is a section below on how it is actually set.

Want a more accurate result?

Calculator results are estimates only. The residual the tax rules require depends on the asset, and a broker can confirm it against your actual quote.
No fee from us for arranging your finance. No obligation. Takes 2 minutes

What this calculator is modelling

This tool models the structure used right across asset finance: an amount financed, regular repayments over a set term, and a residual left owing at the end. That shape is shared by a finance lease, a chattel mortgage with a balloon, and a commercial hire purchase agreement. What differs between them is ownership and tax treatment, not the repayment arithmetic.

Australian businesses generally finance equipment one of four ways.

Chattel mortgage

You own the asset from day one and the financier takes a mortgage over it. The most common structure for Australian businesses buying plant or vehicles outright. A balloon is optional and negotiated.

Finance lease

The financier owns the asset and you lease it. A residual is required at the end, and how low it can go is governed by tax rules rather than by negotiation. This is the structure the section below deals with.

Commercial hire purchase

You hire the asset and ownership passes once the final payment is made. Less common than it once was, still in use.

Rental or operating lease

You never own it. You use it, hand it back at the end, and there is no residual to pay out.
Which structure suits you is a tax and cash flow question rather than a rate question, and it is worth settling before you start comparing repayments. Your accountant is the right person on the tax side. What this page can do is explain the one number inside the calculation that catches people out.

The residual, and who actually decides it

The residual is the lump sum still owing when the term ends. Raise it and the monthly repayment falls. Lower it and the repayment rises but you owe less at the end. On a chattel mortgage that trade-off is yours to make with the financier.

On a finance lease it is not. There is a floor, and the floor is set by tax rules.

The reasoning is straightforward. A lease that pays an asset down to nothing is not really a lease, it is a loan wearing a lease’s paperwork, and the two are taxed differently. Requiring genuine value to remain in the asset at the end is what keeps a lease a lease.
Minimum residual value, as a percentage of cost

= 75% − [ ( 75% ÷ effective life ) × total leased period ]

From Australian Taxation Office Taxation Determination TD 93/142. Effective life and leased period are both in years.
Two things about that formula are worth pausing on.

First, it runs on the total leased period. Consecutive leases of the same asset are added together, so re-leasing the same machine does not reset the clock.

Second, and this is where most published advice goes wrong, it depends on the effective life of the asset. Not on the term alone.

The table everyone quotes is the car table

Search for lease residual percentages and you will find the same five numbers everywhere: 65.63, 56.25, 46.88, 37.5 and 28.13 per cent for one to five year terms. Run the formula above with an effective life of eight years and you get exactly those figures. Eight years is the effective life used for cars.

Business plant and machinery frequently has a longer effective life than a car. Put a longer effective life into the same formula and the minimum residual goes up, sometimes a long way up.

5 year effective life

1 yr  60.00%
2 yr  45.00%
3 yr  30.00%
4 yr  15.00%
5 yr  0.00%

shorter-life plant

8 year effective life

1 yr  65.62%
2 yr  56.25%
3 yr  46.88%
4 yr  37.50%
5 yr  28.12%

the figure everyone quotes, and it is the car one

10 year effective life

1 yr  67.50%
2 yr  60.00%
3 yr  52.50%
4 yr  45.00%
5 yr  37.50%

many machines

13.3 year effective life

1 yr  69.36%
2 yr  63.72%
3 yr  58.08%
4 yr  52.44%
5 yr  46.80%

heavier plant

20 year effective life

1 yr  71.25%
2 yr  67.50%
3 yr  63.75%
4 yr  60.00%
5 yr  56.25%

long-life plant
Read across the three-year row. On a car the minimum residual is 46.88 per cent. On a twenty-year-life asset it is 63.75 per cent. Same term, same finance, very different final payment.

The effective life that applies to your asset comes from the Commissioner’s effective life determination, and your accountant will confirm which one. The figures in this table are the formula applied at representative effective lives to show the pattern, not a determination that any particular asset has that life.

Worked example: the same machine, two residuals

The figures below are illustrative and are not a rate offer, a quote, or tax advice. They show how the arithmetic behaves.

Take a $120,000 machine on a three year finance lease at an assumed 8.5 per cent.

If it were a car, eight year effective life
Minimum residual 46.88 per cent, which is $56,250.
Monthly repayment about $2,411.
Total paid including the residual, about $143,000.

If it is long-life plant, twenty year effective life
Minimum residual 63.75 per cent, which is $76,500.
Monthly repayment about $1,915.
Total paid including the residual, about $145,400.

The monthly repayment is roughly $496 lower on the second one. That looks like the better deal until you reach the end of the term, where the payout is $20,250 higher.
This is why entering a residual you guessed at produces a repayment figure that means nothing. The residual drives the repayment, and on a lease the residual is not free to choose.

What the calculator does not show you

A repayment figure is one input into an asset finance decision. These are the others, and every one of them can move the answer.

GST is treated differently by structure

On a chattel mortgage a GST-registered business can generally claim the GST on the asset price in the next activity statement. On a lease the GST sits inside the payments instead. Same machine, very different early cash flow. Your accountant should be the one confirming which applies to you.

So is the deduction

Ownership determines who depreciates the asset and what is deductible. This is the main reason the structure choice is a tax question first and a rate question second.

The comparison rate will usually be absent

Finance taken wholly for business purposes generally sits outside the National Credit Code, so there may be no comparison rate on the quote at all. You have to add the fees up yourself. Ask for every fee in writing before you compare anything.

What the asset is actually worth at the end

The minimum residual is a tax floor, not a market valuation. If the machine is worth less than the residual when the term ends, that gap is yours. On assets where used values move quickly, that deserves thought at the start rather than at the end.

Before you compare quotes

Most asset finance calculators stop at a repayment figure. Most asset finance calculators stop at a repayment figure. Ask each financier for the structure, the term, the rate, every fee, and the residual in dollars rather than as a percentage. Then run them side by side on the same term. A repayment on its own tells you almost nothing until the residual behind it is on the table.
Related tools on this site: loan repayment calculator, comparison rate calculator and the borrowing power calculator.

If you are ready to have the numbers checked against a real quote, see equipment and asset finance or business loans.
Sources
Australian Taxation Office: Taxation Determination TD 93/142, which sets out the minimum residual value formula and its worked examples, and Taxation Ruling IT 28, the original guidance it builds on.
Australian Taxation Office: Car leasing and FBT, for the conditions a lease has to meet.

About the figures on this page. Every residual percentage shown was calculated directly from the TD 93/142 formula, not copied from a third party. The eight year column reproduces the widely quoted table exactly, which is the check that the formula has been applied correctly. Repayment figures use the standard lease payment method at monthly rests. The rate and asset values used are illustrative and are not an offer.

General information only, and not tax advice. Nothing on this page takes your objectives, financial situation or needs into account. Effective life, GST treatment and deductibility depend on your circumstances and on the asset, and your accountant or registered tax agent is the right person to confirm them. Loanity is a credit representative and can provide credit assistance once we understand your situation.
STILL GOT QUESTIONS?

Asset finance questions, answered

How do I calculate asset finance repayments?

Take the amount financed, subtract the present value of the residual, then amortise what is left over the term at the rate you have been quoted. The calculator above does this for you. The part that needs care is the residual: on a lease it cannot be set below a minimum, and that minimum depends on the asset’s effective life as well as the term.

It is the lump sum still owing when the term ends. A higher residual means lower repayments along the way and a bigger single payment at the end. On a chattel mortgage the balloon is negotiated with the financier. On a finance lease there is a floor set by tax rules, and it cannot be pushed below that.

The Australian Taxation Office sets it in Taxation Determination TD 93/142. The formula takes 75 per cent, then subtracts 75 per cent divided by the asset’s effective life, multiplied by the total leased period. Run it for an eight year effective life over five years and it gives 28.13 per cent. That is where the commonly quoted figure comes from.

Because the figures published almost everywhere assume an eight year effective life, which is the figure used for cars. Plant and machinery often has a longer effective life, and a longer effective life produces a higher minimum residual for the same term. On a three year term the difference between an eight year and a twenty year effective life is roughly seventeen percentage points of the asset’s cost.

No. The determination works on the total leased period, so leasing the same asset for two years and then a further year is treated as three years, not as two separate terms. That closes off using short consecutive leases to reach a lower residual.

That depends on how your business is structured, how it accounts for GST, and what you intend to do with the asset at the end. It is a tax question before it is a finance question, and your accountant should answer it. Once the structure is settled, comparing financiers on rate, fees and residual is straightforward and that is where a broker helps.

Usually not. Comparison rates are required on regulated consumer credit, and finance taken wholly for business purposes generally sits outside that regime. So the quote may show a rate with no comparison rate beside it. You have to gather the fees yourself and compare total cost rather than headline rate.

You still owe the residual. The minimum residual is a tax floor built on effective life, not a valuation of your particular machine on that day. If used values for that type of asset have fallen, the gap is yours to cover. It is worth thinking about at the start on assets where values move quickly.

Often yes, though the age and type of the asset affect both what is available and the term a financier will offer. Older assets tend to attract shorter terms. The practical answer depends on the specific machine, so it is better checked than guessed.

We do not charge you a fee for arranging your asset finance. Brokers are generally paid a commission by the financier when the facility settles. Financiers may charge their own establishment or documentation fees, and those are disclosed to you before you commit. If any fee from us would ever apply, you would be told in writing beforehand.