Used vs New Equipment Finance: How Age Changes Term, Rate and LVR
Age does not change the deal because lenders dislike old machines. It changes the deal because the finance term is capped by how much working life the asset has left, and the published benchmark for how long an asset lasts assumes the asset is new.
The short answer
A used asset usually gets a shorter term, a higher rate and a lower loan to value ratio than the same asset new. The reason is that the lender’s security is what the machine will be worth when the loan ends, and a used machine reaches the end of its working life sooner. Term is the variable that moves first, because a lender will not write a term that outlasts the asset. Rate and deposit then adjust around whatever term is left.
Why the Age of the Asset Changes the Deal
Equipment finance is secured lending, and the security is the machine. That sounds obvious, but it has a consequence people miss: the lender is not really lending against what the machine is worth today. It is lending against what the machine will be worth at the end of the term, because that is the only moment the security has to do any work.
Run that forward and the whole used versus new question becomes one question. How much working life is left, and will there still be some at the end of the loan?
Everything else follows from the answer:
- Term gets cut first, because a term that runs past the end of the asset’s useful life leaves the lender unsecured at exactly the point where a borrower under pressure stops paying.
- Rate adjusts for the extra risk in a less predictable resale market and a narrower pool of buyers.
- Deposit rises where the valuation is uncertain, which is another way of saying the LVR falls.
Notice the order. Term is not one of three independent levers. It is the binding constraint, and the other two are set around it.
The lender is not lending against what the machine is worth today. It is lending against what it will be worth on the last day of the term.
Term: Remaining Working Life Is the Ceiling
There is a published benchmark for how long equipment lasts, and it is worth knowing about because it is the closest thing Australia has to an official answer.
The Commissioner of Taxation determines the effective life of depreciating assets. Until recently this sat in a taxation ruling. It now sits in a legislative instrument, the Income Tax Assessment (Effective Life of Depreciating Assets) Determination 2025, which replaced the 2015 instrument and came into force on 16 September 2025. It runs to hundreds of pages of asset categories with a determined life against each.
| Asset | Determined effective life |
|---|---|
| Cranes | 20 years |
| Rollers | 15 years |
| Hydraulic excavators | 10 years |
| Graders | 10 years |
| Dozers | 9 years |
| Wheel loaders | 8 years |
| Skid steer loaders | 7 years |
| Scrapers | 7 years |
Now the part that matters, and it is the reason this whole article exists. The ATO’s own guidance explains that when the Commissioner works out an effective life, it “assumes that the depreciating asset is new and has regard to general industry circumstances of use”.
Every figure in that table is a new-asset number. A 6 year old excavator does not have 10 years of life ahead of it. It has whatever is left.
That is the arithmetic sitting behind a lender’s decision. Take a determined life of 10 years, buy the machine at 6 years old, and there are roughly 4 years of benchmark life remaining. A 5 year term on that machine ends after the benchmark life has run out. A lender looking at the same numbers reaches the same conclusion, which is why the term offer comes back shorter without anyone needing to explain why.
On the tax side, the buyer of a second-hand asset has a choice. They can use the Commissioner’s determined life, or they can self-assess the asset’s effective life from their own start time, which in practice means estimating what is left. That is a question for your accountant rather than your broker, but the two choices exist and they produce different deductions.
The ATO Table That Shows the Mechanism
If you want proof that asset life drives the structure of equipment finance rather than the other way round, the clearest evidence is in an ATO determination about leases.
For a lease to be treated as a genuine lease, the residual value at the end has to reflect what the asset will actually be worth. Taxation Determination TD 93/142 sets out minimum residual values, and it opens by dismissing the alternative: “the residual value of a leased item should reflect its market value at the end of the lease, not its written-down value.”
It then gives a formula:
Minimum residual value as a percentage of cost = 75% minus [(75% divided by effective life) multiplied by total leased period]
Feed asset life into one side and lease term into the other, and the table below comes out.
| Lease term | 5 year life | 8 year life | 10 year life | 20 year life |
|---|---|---|---|---|
| 1 year | 60% | 65.63% | 67.5% | 71.25% |
| 2 years | 45% | 56.25% | 60% | 67.5% |
| 3 years | 30% | 46.88% | 52.5% | 63.75% |
| 4 years | 15% | 37.5% | 45% | 60% |
| 5 years | Nil | 28.13% | 37.5% | 56.25% |
Read the bottom left cell. On a 5 year lease of an asset with a 5 year effective life, the minimum residual is nil. The ATO’s own formula says that at the end of that arrangement the asset is worth nothing worth naming. Read the bottom right cell and a 20 year life asset on the same 5 year lease still holds a minimum residual of 56.25 per cent.
Same term. Same five years of payments. Wildly different amount of asset left at the end.
This is a tax determination about leases, not a lending rule, and no lender is bound by it. But it is the same calculation a credit assessor is doing, published by a third party, with the arithmetic shown. It is why a shorter-lived or older asset gets a shorter term, and it is why the pushback is arithmetic rather than prejudice.
Found a used machine and want to know what it will actually finance at?
Send us the make, model, year, hours and the asking price. We will tell you what term is realistically available, where the deposit is likely to land, and which lenders treat that asset class and that age the way you need. Asset finance moves faster than any other lending we do. No obligation, and no fee at any point.
Rate and LVR, and the Numbers We Will Not Publish
Here is where we part company with most pages on this subject.
Age limits, maximum terms and LVR caps for used equipment are lender credit policy. They are not published law, they differ sharply between lenders, they differ by asset class within the same lender, and they change without notice. We hold a credit licence, which means we do not publish other people’s credit policy as though it were a rule, and we do not publish interest rates.
So instead of a table of numbers that would be wrong by the time you read it, here is what age actually changes, and why:
- The age test is usually applied at the end of the term, not the start. This is the most useful thing to know, and it catches people. A lender that is comfortable with an asset up to a certain age at the end of the loan will let you buy older gear on a shorter term, or newer gear on a longer one. The constraint is the asset’s age at the finish line. Once you understand that, you stop arguing about the machine and start structuring the term.
- Hours and kilometres often matter more than years. Two excavators built the same year with very different hour meters are not the same risk. On plant and trucks, usage is frequently the stronger signal, and a well-documented service history is worth real money in the assessment.
- Resale depth drives the rate more than age alone. An asset class with an active, liquid second-hand market is easier to price and easier to recover. Specialised equipment with a handful of possible buyers is harder, regardless of its age or condition.
- Private sales are treated differently from dealer sales. A private purchase usually means an independent valuation and an encumbrance check before settlement. That is not a reflection on the seller. It is the lender confirming the security exists, is worth what you say and is not already financed by somebody else.
One structural detail worth knowing, because it puts a hard edge on long terms for certain assets. Where a security interest is registered on the Personal Property Securities Register against goods described by serial number, which covers motor vehicles and watercraft, registration is limited to a maximum of 7 years. Other collateral can be registered for up to 25 years or with no stated end time. It is a registration rule rather than a lending rule, but it is a reminder that 7 years is a boundary in the plumbing of secured lending, not an arbitrary number a credit team invented.
When Used Equipment Is the Better Buy
Nothing above is an argument for buying new. Plenty of used purchases are the better commercial decision, and a shorter term is not automatically a worse outcome.
You are not paying for the first year of depreciation. The steepest part of the curve happens early. Buying a machine that has already taken that hit means the price you pay is closer to what it will be worth when you sell it, which reduces your real cost of ownership even when the interest rate is higher.
A shorter term is not a bigger loss. A shorter term on a cheaper machine can mean lower total interest than a longer term on a new one, even at a higher rate. The comparison people make is rate against rate. The comparison that decides the outcome is total cost of ownership over the time you will actually keep it.
Availability is real. If a new machine has a long lead time and the used one is on a yard now, and you have work booked, the machine that exists is worth more than the machine that is coming.
Proven units in proven classes. In asset classes where the second-hand market is deep and the models are well understood, a used purchase carries far less valuation uncertainty than the general case, and lenders price accordingly.
What to Check Before You Commit to a Used Machine
The order here matters. Most of the trouble on used equipment deals comes from committing to the asset before checking whether it can be funded the way you assumed.
- Get the age-at-end-of-term answer first. Before you negotiate on price, find out what term the asset supports. It changes your repayment, which changes what you can afford to pay for the machine.
- Confirm nobody else has a claim over it. A PPSR search on a private purchase is not optional. If there is an existing registered interest that is not discharged at settlement, you can pay for a machine somebody else can repossess. See our guide to truck and equipment finance for how this is handled on used purchases.
- Have the hours and service history in writing. Not the seller’s recollection. Documentation changes the valuation and sometimes changes the term.
- Budget for an independent valuation on a private sale. It is a small cost that determines the whole structure, and it is better to know the number before you sign anything.
- Ask your accountant about the effective life choice. Using the Commissioner’s determined life or self-assessing the remaining life produces different deductions on a second-hand asset. Decide it deliberately rather than at tax time.
How Intellect Finance can help
On used equipment we do three things. We find out what term the asset class and the age actually support before you are committed to a price, because the term sets the repayment and the repayment sets what the machine is worth to you. We match the asset to lenders whose policy fits it, which on used gear matters more than on almost any other lending, because the policies diverge so widely. And we move quickly. Asset finance is the fastest lending we do, and on a straightforward file Joe has had equipment funded and settled in as little as 2 hours. That is a best case, not a typical timeframe, and it should never be assumed for commercial property or corporate lending, which run on different timelines entirely. See equipment finance and the broader asset finance range.
What we will not do is tell you an age limit or an LVR cap as though it were a published rule. It is credit policy, it varies by lender and asset, and quoting it from a blog post is how people end up committed to a machine that cannot be funded the way they were told. We check it against current policy, per lender, on your actual asset. We are also not a registered tax agent, so depreciation and effective life questions belong with your accountant.
Equipment and asset finance for a business purpose is not regulated consumer credit under the National Consumer Credit Protection Act 2009, and Best Interests Duty does not apply. Where an asset is financed predominantly for personal use, the lending is regulated consumer credit and Best Interests Duty does apply. We charge you nothing on any loan type, with no arrangement fee and no clawback recovery fee. Penrith based since 2005, holding Australian Credit Licence 390611.
Read Intellect Finance’s Google reviews
A good number of these came from operators buying plant and vehicles, where the machine was found first and the finance had to catch up.
These reviews reflect other clients’ experiences. They are not a promise of any particular outcome for your loan, which will always depend on your circumstances and the lender’s assessment.
Frequently Asked
Used Equipment Finance FAQs
What operators ask once they have found the machine they want.
Can you finance used equipment in Australia?
Yes, and it is common. What changes compared with a new asset is usually the term, which is shorter, and often the deposit, which is larger. Rate tends to be higher. The asset class matters as much as the age, because a deep second-hand market is easier for a lender to value and recover against.
How old is too old to finance?
There is no single answer, because age limits are lender credit policy and differ by lender and by asset class. The important mechanic is that the limit is usually applied to the asset’s age at the end of the term, not at the start. That means older equipment can often still be funded on a shorter term.
Why is the term shorter on used equipment?
Because the lender’s security is what the machine is worth at the end of the loan. A term that runs past the end of the asset’s working life leaves the loan effectively unsecured at its most vulnerable point. The published effective life figures assume an asset is new, so a used machine has less of that life left.
Do hours matter more than the year of manufacture?
On plant and trucks, frequently yes. Two machines built in the same year with very different hour meters or odometers are not the same risk, and a documented service history can change both the valuation and the term offered. Have the hours and the service records in writing before you apply.
Is it harder to finance a private sale than a dealer purchase?
It involves more steps rather than being harder. A private purchase generally means an independent valuation and a PPSR search before settlement, so the lender can confirm the asset is worth the price and carries no existing registered security interest. Build that time into your settlement date.
Is buying used actually cheaper once the higher rate is included?
Often, but rate against rate is the wrong comparison. A used machine has already taken the steepest part of its depreciation, so the price you pay sits closer to what you will sell it for. Compare total cost of ownership across the period you will actually keep it, including interest, not headline rates.
What is a residual or balloon, and does age affect it?
A residual is the amount still owing at the end of the term. It is meant to reflect the asset’s market value at that point, which is why asset life drives it. The ATO’s determination on minimum residual values for leases shows the pattern clearly: the shorter the effective life, the faster the residual falls away.
Can I claim depreciation on second-hand business equipment?
Second-hand business assets are depreciable, and for a second-hand asset you can either use the Commissioner’s determined effective life or self-assess the effective life from when you start holding it. The two produce different outcomes. We are not a registered tax agent, so confirm the position with your accountant.
The bottom line
Used equipment finance gets written about as though lenders have an arbitrary prejudice against old machines, and the advice is usually to shop around until somebody says yes. That misreads the problem. The constraint is the asset’s remaining working life, and it is a real constraint that no amount of shopping removes.
What shopping around does change is which lender’s policy happens to fit your asset, and that genuinely varies a lot. Two lenders can look at the same machine and reach quite different conclusions about it, which is the strongest argument for not walking into the first one you find.
The uncomfortable part is that most people do this in the wrong order. They find the machine, agree the price, and then discover the term is shorter than assumed, which makes the repayment higher than assumed, which makes the price they agreed to look different. Two phone calls before the handshake, one to a broker about term and one to an accountant about the effective life choice, change the whole shape of the purchase. Both are cheaper before you commit than after.
Joseph Sukkar
Joe has spent more than 25 years arranging asset and equipment finance in Australia, much of it for operators buying used plant and vehicles where the term available decided whether the purchase made sense. Intellect Finance charges clients no fee on any loan type. More about the team.
Sources
Federal Register of Legislation, Income Tax Assessment (Effective Life of Depreciating Assets) Determination 2025, registered 15 September 2025 and in force from 16 September 2025, for the determined effective life figures and the instrument that replaced the 2015 determination. legislation.gov.au
Australian Taxation Office, Guide to depreciating assets, for the choice between the Commissioner’s determined effective life and self-assessment, and for the statement that the Commissioner’s determination assumes the asset is new. ato.gov.au
Australian Taxation Office, Taxation Determination TD 93/142, for the minimum residual value table, the formula behind it, and the principle that a residual should reflect market value at the end of the lease rather than written-down value. ato.gov.au
Personal Property Securities Register, operated by the Australian Financial Security Authority, length of registration, for the 7 year maximum on registrations against serial-numbered goods and the durations available for other collateral. ppsr.gov.au
Important disclosures, general advice warning and licensing
General information only. This article is general information only and does not constitute financial, credit, legal or tax advice. It does not take your personal or financial circumstances into account. Before acting on any information here, consider whether it is appropriate to your objectives, financial situation and needs.
Tax figures are tax figures, not lending terms. The effective life determinations and the minimum residual value table reproduced here are taxation instruments. They describe how assets are depreciated and how leases are characterised for tax purposes. No lender is bound by them and they are not an indication of the term, rate or residual any lender will offer. They are included because they show the published basis on which asset life is measured.
Tax. Intellect Finance is not a registered tax agent. Depreciation, effective life, the choice between the Commissioner’s determination and self-assessment, and the treatment of leases all depend on individual circumstances and change. Confirm your position with your accountant or a registered tax agent. This article publishes no instant asset write-off, depreciation limit or fringe benefits tax figures.
No lender policy is published here. Maximum asset ages, maximum terms and loan to value limits for used equipment are the credit policy of individual lenders. They differ between lenders and asset classes and change without notice. This page deliberately publishes none of them, and no figure here should be treated as an indication of what any lender will accept.
Illustrative arithmetic. The example of a 6 year old asset against a 10 year determined life is arithmetic used to show how remaining life is calculated. It is not a lending outcome, a valuation, or advice about any particular machine.
Timeframes. The 2 hour funding and settlement referred to is a best case on a straightforward asset finance file, not a typical timeframe, and nothing here is a promise of any timeframe. Commercial property and corporate lending run on materially longer timelines and should never be assumed to move at asset finance speed.
Lender policy varies and changes. Descriptions of common practice are general observations, not any lender’s policy. This page publishes no interest rates and names no lenders. No broker can guarantee approval, pricing, a valuation outcome or a timeframe.
Best Interests Duty. Equipment and asset finance for a business purpose is not regulated consumer credit under the National Consumer Credit Protection Act 2009, and Best Interests Duty does not apply. Where an asset is financed predominantly for personal use, the lending is regulated consumer credit and Best Interests Duty does apply. Where funds serve more than one purpose, the predominant purpose determines the classification.
What we charge you. Nothing, on any loan type. No arrangement fee for residential, commercial, corporate, asset, SMSF or personal lending, no fee for complex or specialist lending, and no clawback recovery fee if a loan is discharged early. Lenders pay us a commission on settlement, disclosed to you in writing in our Credit Guide before we provide credit assistance.
About the reviews shown. The reviews displayed on this page are genuine reviews published by clients on Intellect Finance’s Google Business Profile, shown live via a third-party reviews widget. They reflect those individuals’ own experiences and are not a promise of any particular outcome.
Intellect Finance Pty Ltd holds Australian Credit Licence 390611 and is a member of the MFAA and AFCA. Lending criteria, fees and terms apply. Article checked 18 September 2026.
Next Reads
If You Are Buying Plant or Vehicles
Used Plant and Vehicles
Know the term before you agree the price
Send us the make, model, year, hours and asking price. We will tell you what term the asset realistically supports, where the deposit is likely to land, and which lenders treat that asset class and that age the way you need. If the honest answer is that the machine is too old to fund the way you were told, you will hear that first. Penrith based since 2005, clients Australia-wide. No fee on any loan type. ACL 390611.
General information only, and not tax advice. Asset ages, terms and lending limits are individual lender credit policy and are not published here. No broker can guarantee approval, pricing, a valuation outcome or a timeframe.
Intellect Finance Pty Ltd | Australian Credit Licence 390611 | MFAA Member | AFCA Member