Compare the true cost of paying cash, chattel mortgage, finance lease, and operating lease — with tax savings, depreciation, and opportunity cost factored in. See which option actually costs your business the least.
The lease vs buy decision is one of the most important financial choices an Australian business makes. Pay cash and you lose liquidity. Finance and you pay interest — but preserve working capital and often save more on tax than the interest costs.
There is no universally "best" option. The right structure depends on your:
You pay the full amount upfront and own the asset outright. No interest, no monthly payments. But you lose the earning potential of that capital (opportunity cost) and can only claim depreciation as a tax deduction over the asset's effective life.
The lender advances funds and you take ownership immediately. You make fixed repayments (principal + interest) and can claim a GST credit upfront on the full purchase price. Tax deductions include interest and depreciation. Best for GST-registered businesses that want ownership and large upfront deductions. Learn more about chattel mortgages →
The lender buys the asset and leases it to you. You make fixed rental payments (100% tax-deductible) and have the option to purchase at the end of the term for the residual value. GST is claimed on each payment rather than upfront. Learn more about finance leases →
Similar to a long-term rental. You use the asset and return it at the end. No balloon payment, no residual to worry about. Payments are typically lower because you're only paying for the usage period, not the full asset value. The asset stays off your balance sheet. Learn more about operating leases →
It depends on your business structure, cash flow, and tax position. Buying outright avoids interest but ties up cash. A chattel mortgage gives you ownership and GST credits upfront. A finance lease preserves cash and offers full repayment deductions. An operating lease has the lowest repayments and keeps the asset off your balance sheet.
With a finance lease, 100% of lease payments are tax-deductible as a business expense. With a chattel mortgage, you can claim interest, depreciation and potentially the instant asset write-off. With an operating lease, the entire rental payment is deductible. GST credits differ by structure.
The instant asset write-off applies to assets purchased outright or via chattel mortgage (where you own the asset). It does not apply to finance leases or operating leases, as the lender retains ownership. For 2025–26, the threshold is $20,000 for small businesses with turnover under $10 million.
Opportunity cost is the return you would have earned if you kept your cash invested instead of spending it on an asset. For example, if you pay $150K cash for a truck but could have earned 5% p.a. in a term deposit, you're effectively "losing" that return. Financing preserves your capital for higher-return opportunities.
Operating leases typically have the lowest monthly payments because you only pay for the usage period (not the full asset value). Finance leases and chattel mortgages with a balloon/residual also reduce monthly payments compared to fully amortised loans, but you'll owe the balloon at the end.
Get a free quote from a licensed broker who will review your numbers and recommend the best structure for your tax position and cash flow.