Key highlights
- Options usually include paying out, refinancing, returning or upgrading
- The residual or balloon is the amount left to own the machine
- Compare the machine's value against the residual before deciding
- Refinancing the residual can spread the final payment over time
At the end of a machine lease you generally have a few options: pay the residual or balloon amount to own the machine outright, refinance that residual over a new term, return the machine, or trade it in on an upgrade. Which suits you depends on the machine's value against the residual and your plans. Overdrive's Simon Kendrick compares more than 80 banks and non-bank lenders on one application to help you weigh the end-of-lease choices.
Understanding the residual or balloon
Many leases and chattel mortgages carry a residual or balloon, a lump sum set at the start that remains owing when the term ends. It keeps the earlier repayments lower, but it has to be dealt with at the finish. The first thing to establish is the exact residual figure and the date it falls due. Then compare it to what the machine is realistically worth now. If the machine is worth comfortably more than the residual, you hold useful equity. If the values are close, or the machine is worth less, that shapes whether keeping it makes sense or whether returning or trading up is the better move.
Paying out or refinancing the residual
If you want to keep the machine, you can pay the residual from cash and own it outright, or refinance that amount over a fresh term to spread the cost. Refinancing suits owners who want to keep the machine working without a large one-off payment, and it can be arranged before the residual falls due so there is no gap. As a guide, rates on a residual refinance start from around 6.55% p.a. for strong, asset-backed deals, with older machines and weaker files priced higher, indicative and subject to lender assessment. Comparing lenders matters because pricing on an ageing machine varies widely.
Returning or upgrading instead
If the machine no longer fits your work, or its value sits below the residual, returning it or trading up can be the smarter path. On a lease with a return option you hand the machine back under the agreement's conditions, so check for any fair-wear-and-tear or hour limits. On an upgrade, the machine's value is applied against what you owe, and any equity becomes a deposit on the next one. Planning this before the term ends avoids rushed decisions. A broker can line up the new finance and the payout timing so you move from one machine to the next with minimal downtime.
Deciding what to do at the end of a lease is easier with the numbers in front of you. Simon Kendrick can compare paying out, refinancing the residual or upgrading across more than 80 lenders on one application. Reach out for a free, no-obligation chat before your term ends, so you choose the option that genuinely suits your machine and your plans.
Frequently Asked Questions
Do I own the machine at the end of a lease?
Not automatically. It depends on the agreement type. With a chattel mortgage you own the machine throughout and simply clear any residual. With some leases you have an option to purchase by paying the residual, or you may return the machine. Checking your contract's end-of-term terms tells you exactly which applies to you.
Can I refinance the balloon rather than pay it in cash?
Often yes. Refinancing the residual spreads that final lump sum over a new term, which keeps the machine working without a large one-off payment. It is usually arranged before the residual falls due. Because rates on older machines vary between lenders, comparing the market helps you refinance the balloon on the best available terms.
What if the machine is worth less than the residual?
This can happen with heavy use or a soft resale market. If returning the machine is an option under your lease, that may be sensible. If you want to keep it, refinancing the residual is possible for eligible applicants, though you are financing more than the machine is worth. A broker can help you compare the options.
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