Key highlights
- Total cost is the amount borrowed plus all interest and fees
- A longer term or a balloon changes the total significantly
- The headline rate alone understates the real figure
- Comparing 80+ lenders reveals the genuine total cost
The total cost of financing machinery is the amount you borrow plus all the interest and fees paid over the term, less any tax benefits, and including a balloon if you have one. It is a bigger number than the headline rate suggests, which is why the true figure matters. At Overdrive, our broker Simon Kendrick compares 80+ banks and non-bank lenders on one application, adding up rate and fees across your term options so you can see the total cost, not just the monthly repayment.
What total cost actually includes
The total cost of financing machinery is everything you pay from start to finish, not just the interest rate. It combines the amount financed, the interest across the whole term, every fee, and any balloon or residual payment due at the end. From that you can subtract any tax benefits to reach a net figure. Looking only at the monthly repayment or the headline rate hides this, because a low rate over a long term can produce a higher total than a slightly higher rate over a shorter one. Understanding the full number lets you compare offers on the basis that matters most: what the finance costs you overall.
How the term and balloon move the total
Term length has a large effect. Terms typically run 1-7 years, and stretching the term lowers each repayment but adds more interest, lifting the total cost. A balloon or residual reduces monthly repayments by deferring part of the principal to the end, but that lump sum, plus the interest carried on it, means you often pay more overall than a fully amortising loan. Balloons can still make sense for cash flow or if you plan to upgrade, but it is important to see the total, including the balloon, rather than being drawn in by the lower monthly figure alone. The structure is a genuine cost lever.
The rate and fees behind the number
The rate and fees are the building blocks of the total. Rates start from around 6.55% p.a. for strong, asset-backed deals; lower-doc, older or cheaper assets and weaker credit are priced higher, and these figures are indicative and subject to lender assessment. On top sit establishment fees, ongoing account fees and any registration or broker charges. A lender with an eye-catching rate but heavier fees can end up costing more over the term than one with a slightly higher rate and lighter fees. Adding it all up, rather than comparing rates in isolation, is the only way to identify the genuinely cheapest total.
Tax and the net cost
Your total cost has a gross and a net version. The interest on the finance and the depreciation of the machinery may be deductible depending on how the finance is structured and your circumstances, which can reduce the net cost meaningfully. Different structures, such as a chattel mortgage or a lease, can have different tax and GST treatment. This is general information only and everyone's position differs, so check with your accountant before relying on any benefit. For eligible applicants, quick pre-approval and settlement may be available, subject to lender criteria and documentation.
The total cost is the number worth focusing on, because it captures what financing your machinery really costs across the whole term. Let Simon run your deal across 80+ banks and non-bank lenders on one application and add up the rate, fees and any balloon so you can compare offers on total cost, not just the monthly figure. Reach out for a free, no-obligation quote and see the full picture.
Frequently Asked Questions
Is total cost the same as the interest rate?
No. The rate is one input; the total cost is the amount borrowed plus all interest and fees over the term, including any balloon. A low rate over a long term can produce a higher total than a higher rate over a shorter one, so the total is the more meaningful figure to compare.
Does a balloon payment increase the total cost?
Usually yes. A balloon lowers your monthly repayments by deferring principal, but you carry interest on that deferred amount and still owe the lump sum at the end, so the total is often higher than a fully amortising loan. It can suit cash flow, but weigh the total, not just the monthly figure.
How do tax benefits affect the total?
Interest and depreciation may be deductible depending on your structure and circumstances, which can reduce the net total cost. The treatment varies with the finance type and your situation, and this is general information only, so check with your accountant to understand what benefit, if any, applies to your business.
Why compare total cost rather than the rate?
Because a sharp rate can be undermined by high fees or a long term, while a slightly higher rate with lighter fees may cost less overall. Comparing the full total across many lenders shows which offer is genuinely cheapest for your deal, which the headline rate alone can easily disguise.
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