Should you pay cash or finance equipment? A practical way to decide

What's the real question?

It isn't "cash or debt?". It's "what is this cash worth to my business, compared with what finance costs?".

Cash in the bank does three jobs:

The Reserve Bank's October 2026 Financial Stability Review notes smaller businesses continue to face cash-flow pressure. Spending your buffer on equipment and then being caught short is one of the most common ways that pressure turns into a crisis.

• Insurance. It covers wages, rent and bills in a slow month or when a big customer pays late.
• Opportunity. It lets you say yes to a bulk discount, a new contract or a good hire.
• Avoiding worse debt. Businesses that run out of cash often end up borrowing in a hurry, on worse terms.

Quick decision table

Plenty of reserves left after paying, no better use for the cash: Leaning Pay cash
Reserves would drop below two or three months of costs: Leaning Finance
Purchase earns more each month than the repayment: Leaning Finance, keep the cash
Purchase earns little or nothing directly (e.g. a nicer office): Leaning Pay cash if you can afford it, or wait
Seasonal business heading into a quiet period: Leaning Finance, protect the buffer
Small item well under your monthly turnover: Leaning Pay cash

Does tax change the answer?

Usually not much. If you own the asset, whether bought with cash, a loan or a chattel mortgage, you generally claim depreciation, or the instant asset write-off for eligible assets under $20,000 each if your business turns over less than $10 million. With a loan, interest on business borrowing is generally deductible too. Leasing is treated differently. The tax side is worth confirming with your accountant, but it rarely flips the cash-versus-finance decision on its own. Our guide on the instant asset write-off and finance covers the timing questions.

An illustrative example

A Cairns refrigeration mechanic wants a $42,000 refrigerant recovery and diagnostics set-up that will let him take on commercial cool room work he currently passes to another business. He has $58,000 in the account. His fixed costs, including his apprentice's wages, run to about $16,000 a month, and the wet season is always slower.

He pays $10,000 as a deposit, finances the rest, and keeps nearly three months of costs in reserve for the wet. The equipment pays the repayment from the first month.

• Paying cash would leave $16,000: one month of costs going into the quiet season.
• The equipment is expected to add around $4,500 a month in work.
• Financing over three years gives a repayment comfortably below that.

What do lenders think of a deposit?

A deposit from your own cash tells a lender you've weighed the purchase and are sharing the risk. It can improve approval odds, reduce the total finance cost and sometimes open up a longer term. But a deposit that empties the account works against you, because lenders also look at the balance left behind. Aim for a deposit that still leaves a sensible buffer, and say so on the application.

Want to keep your cash and still buy the gear?

If the equipment pays its way, there's no prize for draining the account to buy it. Asking us doesn't touch your credit file; a credit check only comes up once you decide to go ahead. We won't send your details around a list of lenders. A real person looks at the purchase and your cash position, and calls you to talk through what makes sense, including when paying cash is the better call.

Please be accurate on the form about the price and what you're buying, so we can match you properly from the start. Talk to us about your equipment.