The short answer
Pay cash when the purchase is small relative to your reserves, you'll still have a healthy buffer afterwards and the equipment won't pay for itself quickly. Consider finance when paying cash would drain your working capital, the equipment earns money straight away, or you want to keep cash for opportunities and surprises. Tax treatment, such as the $20,000 instant asset write-off, can apply either way — check with your accountant.
Key points
- Cash buffer first: don't let a purchase drain the working capital that keeps you trading.
- Equipment that earns money straight away can often cover its own repayments.
- The $20,000 instant asset write-off is permanent from 1 July 2026 for eligible small businesses.
- Compare the total cost of finance in dollars against what the equipment will earn or save.
Why isn’t “pay cash” always the smart move?
It feels responsible. No repayments, no interest, no paperwork. And for plenty of purchases, it is the right call.
But cash in a business isn’t just money — it’s options. It’s what covers a slow month, pays the BAS, buys stock for a big order and absorbs the surprise repair. When a business spends most of its cash on a machine, it may own the machine outright but have nothing left to run the business with. That’s how profitable businesses end up in cash crunches.
So the real question isn’t “cash or finance?” It’s “what does each choice do to my cash position over the next year?”
What should I work out first?
Four numbers make this decision much clearer:
| Number | How to find it | Why it matters |
|---|---|---|
| Your buffer after purchase | Current cash minus the price | Will you still be able to trade comfortably? |
| Upcoming commitments | Next BAS, PAYG, super, big supplier bills | Cash already spoken for |
| What the equipment earns or saves each month | Extra jobs, extra output, lower repair or hire costs | Can it pay its own way? |
| Total cost of finance in dollars | Ask for the full cost over the term, including fees | The real price of keeping your cash |
With those four in front of you, the answer often becomes obvious.
When does paying cash make sense?
- The purchase is small relative to your reserves.
- You’ll still have a healthy buffer afterwards, with tax and super covered.
- The equipment won’t earn much directly — a replacement desk, a tidy-up, a nice-to-have.
- Your cash flow is steady and there are no big commitments ahead.
- You don’t have better uses for the cash in the near term.
If that’s you, pay cash and keep it simple.
When does financing make sense?
- Paying cash would drain working capital below a comfortable buffer.
- The equipment earns money from day one — a second truck for a contract you’ve already won, a machine that doubles output.
- You want cash available for opportunities — stock deals, a new hire, a customer who pays slowly.
- There’s a big tax date coming and you’d rather not leave the BAS short. Our guide on early signs you’ll need funding covers this.
- The item is large, and spreading the cost matches how it earns.
Weighing up a purchase? Tell us what you’re buying and a real person will talk through your options — no credit check to enquire.
What about the instant asset write-off?
The ATO confirms that the $20,000 instant asset write-off is now permanent from 1 July 2026. Small businesses with aggregated turnover under $10 million can deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use in the income year. Before that, the same $20,000 threshold applied for 2025–26 under earlier legislation.
Two things to keep in mind:
- It’s a tax deduction, not a discount. It reduces taxable income; it doesn’t make the equipment free.
- Eligibility depends on the asset and your circumstances. Talk to your accountant about how it applies to your purchase, whether you pay cash or finance.
And remember that large write-offs can make a year’s profit look lower on paper. If that happens and you need to borrow later, our page on borrowing after a loss year explains how lenders add depreciation back.
A simple worked comparison (illustrative)
This example is illustrative only; figures are made up and don’t represent any offer.
A landscaping business has $90,000 in the bank and wants a $60,000 compact track loader. Its next BAS is about $22,000, and it keeps around $30,000 as a safety buffer.
- Pay cash: $90,000 − $60,000 = $30,000 left. After the BAS, that’s $8,000 — well below the buffer. One slow month or a breakdown and the business is squeezed.
- Finance: the business keeps its $90,000, pays the BAS comfortably and holds its buffer. The loader lets it take on jobs it was subcontracting out, which more than covers the repayments.
- Middle ground: pay a $20,000 deposit and finance the rest, keeping $48,000 in hand after the BAS.
The “cheapest” option on paper — cash — would have left the business the most exposed.
Which kinds of finance suit equipment?
It depends on the item, the amount and your situation:
| Situation | Often suits |
|---|---|
| Smaller equipment, trading business | Unsecured or equipment-style finance, sized on turnover |
| Several items or a fit-out | Unsecured facility or property-secured loan |
| Large or specialised equipment | Property-secured loan, or equipment-style finance |
| No property, steady trading | Unsecured — see no property |
| Already carrying several loans | Consider consolidating — see already have loans |
As a guide, unsecured, cash-flow and line-of-credit options for trading businesses typically run from $5,000 to $500,000, sized on turnover and bank statements. Property-secured business loans run from $20,000 to $5,000,000 through first or second mortgages or caveat loans.
What should I check when buying second-hand?
Second-hand equipment can be excellent value. Before you pay:
- Search the PPSR to check nobody else holds a security interest over it. AFSA runs the register.
- Get it inspected by someone who knows the equipment.
- Check hours, service history and parts availability.
- Get a written invoice from the seller with serial numbers.
Lenders financing second-hand gear will usually want the same information.
What should I ask before signing any finance?
Whichever way you go, a few questions protect you from surprises. Ask them of any lender, and expect clear answers in plain English:
- What’s the total cost over the full term, in dollars? Not a percentage — the actual amount you’ll repay, including fees.
- What fees apply at the start, during and at the end? Establishment, monthly account and discharge fees all add up.
- What happens if I want to repay early? Some facilities have early repayment costs; others don’t.
- What security is being taken? Just the equipment, a general security over the business’s assets, a personal guarantee or property?
- How often are repayments taken? Monthly repayments are much easier on cash flow than daily or weekly ones.
- Is there a balloon or residual at the end? If so, how will you pay it?
- Who owns the equipment during the term? It varies by finance type, which can matter for tax — check with your accountant.
If any answer is vague, ask again. A lender who’s comfortable explaining the costs plainly is usually a lender you can work with.
It’s also worth thinking about how the new repayment sits alongside anything else you already owe. If there are several facilities in the mix, our page on already having loans explains when consolidating makes sense.
One last habit worth building: once the equipment arrives, track what it actually earns or saves for the first few months. Comparing the real result against your estimate tells you whether the purchase is paying its way, sharpens your next equipment decision and gives any future lender hard evidence that your investments work. It’s a small spreadsheet that pays for itself many times over.
Ready to decide?
The best equipment decision is the one that leaves your business stronger the day after you buy — with the machine working and enough cash in the bank to sleep at night.
When you enquire with us, there’s no credit check at that first step, and we won’t spray your details across a list of lenders — a real person looks at your purchase and your cash position and calls you. Please be accurate on the form about what you’re buying, the cost and your current trading, so we can match you to the right option first time. Our guide on what a business loan can be used for is handy if you’re funding more than one thing. Start your 60-second enquiry.
Frequently asked questions
Is it always cheaper to pay cash?
On the purchase itself, usually yes, because there's no finance cost. But the real cost of paying cash includes what that cash can no longer do — cover a slow month, fund stock, pay the BAS. Draining your buffer can end up costing more.
Can I claim the instant asset write-off if I finance the equipment?
Eligibility depends on the asset and your circumstances, not simply on whether you paid cash. Small businesses with aggregated turnover under $10 million can deduct eligible assets costing less than $20,000 that are first used or installed ready for use in the income year. Check the details with your accountant.
What's a good cash buffer to keep?
It varies by business. Many owners aim to keep enough to cover a few months of fixed costs, plus upcoming tax obligations. A 13-week cash-flow forecast will show you what your business actually needs.
What if the equipment is second-hand?
Second-hand equipment can be financed, though lenders will want to know its age, condition and value. A PPSR search helps confirm nobody else has a security interest over it.
Should I use a property-secured loan for equipment?
Sometimes. For larger purchases, or where other borrowing isn't available, a property-secured loan can fund equipment. For smaller items, unsecured or equipment-style finance is often simpler.