What Are the Finance Options for Generators?

What Type of Finance Works for Generator Purchases?

A chattel mortgage or hire purchase typically works well for generator financing. Both structures let you own the generator outright, claim depreciation, and deduct interest as a business expense. The choice between them depends on whether you want to claim GST upfront and how you prefer to manage cashflow during the loan term.

Consider a hospitality business on the New South Wales south coast that needed a 60kVA diesel generator after repeated power outages affected cold storage. The business had $18,000 to spend but needed to keep that amount available for stock replacement and wages. A chattel mortgage over five years with a 20% balloon payment meant monthly repayments of roughly $850, leaving working capital intact. The generator cost $45,000 including installation, and the business claimed the GST back in the first BAS, then wrote down the asset value over time.

The chattel mortgage structure meant the business owned the generator from day one, claimed the full depreciation each year, and deducted the interest portion of each repayment. At the end of the term, the balloon payment of $9,000 could be paid out, refinanced, or the generator could be traded in if a newer model made sense by that point. The structure gave the business access to reliable power without locking up capital that was needed elsewhere.

How Does a Balloon Payment Affect Generator Finance?

A balloon payment reduces your fixed monthly repayments by deferring a lump sum until the end of the loan term. For generator purchases, a balloon between 20% and 40% of the loan amount is common, depending on how you plan to use the equipment and whether you expect to upgrade or keep it long-term.

In the example above, the 20% balloon reduced monthly costs by roughly $320 per month compared to a fully amortising loan. That difference mattered during peak season when the business needed cashflow for stock and casual staff. The trade-off is a larger amount due at the end, but that can be managed by refinancing, paying out from revenue, or selling the generator if it's been well-maintained.

If you're buying a generator that will run continuously for mining, farming, or remote construction, a lower balloon or no balloon might make more sense. Equipment that runs hard depreciates faster, so you don't want to owe more than the generator is worth at the end of the term. For standby generators that only run during outages, a higher balloon can work because the equipment holds its value better.

Can You Finance Second-Hand or Refurbished Generators?

You can finance second-hand generators, but lenders assess age, hours, and condition before approving the loan. Most lenders prefer generators under ten years old with documented service history and fewer than 5,000 operational hours for standby units or 15,000 hours for continuous-use models.

A hire purchase structure often works better for older equipment because it spreads the GST across the loan term rather than requiring you to fund it upfront. This matters when buying refurbished units where the margin between purchase price and replacement cost is tighter. If you're purchasing from a dealer who offers vendor finance, they may have arrangements with specific lenders who are more comfortable with older stock.

In our experience, businesses buying second-hand generators are usually trying to solve an immediate problem without committing to new equipment prices. A medical clinic in regional Victoria needed backup power for vaccine storage and surgical equipment but didn't want to spend $60,000 on a new unit. A seven-year-old 40kVA generator with 3,200 hours cost $22,000, and a hire purchase over three years kept repayments under $700 per month. The shorter term reflected the equipment's age, and the clinic planned to upgrade once the loan was cleared.

What About Portable Generators for Events or Short-Term Projects?

Portable generators under $10,000 are usually funded through a business loan or personal loan rather than asset finance, unless you're buying multiple units as part of a fleet. Lenders generally prefer asset finance for equipment over $15,000 where the collateral value justifies the documentation and security.

If you're running an events business or short-term hire operation and need several portable units, financing them together as a package can work. A regional scaffolding and access hire business financed six portable 7kVA generators plus trailers for a total of $48,000 using a chattel mortgage over four years. The generators were hired out weekly, and the revenue from the hire covered the repayments plus maintenance. Because the business owned the generators under a chattel mortgage, they could claim depreciation and deduct interest, which reduced the effective cost.

How Do Tax Benefits Work on Generator Purchases?

You can claim depreciation on the generator and deduct the interest portion of your repayments. If you're using a chattel mortgage, you'll also claim back the GST in your next Business Activity Statement, which reduces the upfront cashflow impact.

Depreciation is calculated using the effective life set by the Australian Taxation Office, which is typically 6.67 years for generators, giving you a diminishing value rate of 30% per year or a prime cost rate of 15% per year. Your accountant will recommend which method suits your situation, but either way, you're writing down the asset value and reducing your taxable income each year.

For the hospitality business mentioned earlier, the $45,000 generator was depreciated at 30% in the first year, which gave a deduction of $13,500. That reduced taxable income and offset some of the cost of the repayments. The interest portion of each monthly repayment was also deductible, which added another $1,800 to $2,200 in deductions depending on the year. The combination of depreciation and interest deductions meant the effective cost of the generator was lower than the sticker price.

What Deposit Do You Need for Generator Finance?

Most lenders want between 10% and 20% deposit for generator purchases, though some will finance up to 100% of the purchase price if your business has strong financials and trading history. The deposit amount affects your interest rate and approval likelihood, so having some equity in the deal usually works in your favour.

If you're buying a generator as part of a larger equipment package, such as a fit-out for a new site or workshop, the deposit requirement might be assessed across the whole package rather than item by item. A joinery business financing $120,000 worth of construction equipment including a 25kVA generator, dust extraction, and panel saws put down 15% across the lot, which gave them flexibility to allocate working capital to materials and wages during the first few months of operation.

Call one of our team or book an appointment at a time that works for you to discuss how generator finance fits your business needs and what structure makes sense for your situation.

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