Excavator Finance Case Study: New vs Used ROI

Quick Answer

An excavator finance case study comparing new versus used equipment ROI reveals that while new excavators offer lower maintenance and longer lifespans, used models can provide faster ROI due to lower initial capital outlay and immediate operational use. In Australia, businesses typically use chattel mortgages or commercial hire purchase for excavator finance, with indicative rates ranging from 7-12% p.a. in 2026 (indicative only) depending on business age, financial strength, and asset age. New equipment finance often attracts better rates for established businesses, while used equipment may require more stringent valuations and potentially higher rates, especially for older assets. The optimal choice depends on a business’s financial health, operational needs, tax strategy, and risk appetite, with modern comparison platforms providing efficient assessment, with settlements possible within 24-48 hours for straightforward applications (subject to lender and circumstances).

Rates are indicative examples only, current as of 2026. Actual rates depend on individual circumstances, lender assessment, asset age, and current market conditions. Consult your financial advisor.

The Excavator Finance Dilemma: New vs. Used ROI

For many Australian construction, civil works, and landscaping businesses, an excavator is a cornerstone asset, driving productivity and project success. However, the decision to finance a new or used excavator is a critical one, significantly impacting a business’s cash flow, operational efficiency, and ultimately, its return on investment (ROI). This isn’t just about the purchase price; it involves a complex interplay of finance rates, maintenance costs, depreciation, and tax benefits.

In this excavator finance case study, we’ll explore two distinct scenarios – financing a brand-new excavator versus a quality used model – providing a detailed financial breakdown and evaluating the potential ROI for each. We’ll delve into the nuances of new excavator finance and used excavator finance, offering practical insights to help business owners make informed decisions in 2025. Understanding the specific benefits and drawbacks of each approach, coupled with effective financing strategies, is key to maximising your heavy equipment finance in Australia.

Understanding Excavator Finance in Australia

Before diving into our case studies, it’s essential to grasp the common finance structures available for excavators in Australia. These structures, primarily chattel mortgage and commercial hire purchase, allow businesses to acquire essential equipment without upfront capital expenditure, spreading costs over several years. Loan Phone helps businesses compare these options from over 100 lenders.

Chattel Mortgage for Excavators

A chattel mortgage is a popular form of asset finance for excavators in Australia. Under this arrangement, the business takes immediate ownership of the excavator upon purchase, while the lender holds a ‘mortgage’ over the asset as security. Once the loan is repaid, the security is released.

Key Features:

• Ownership: The business owns the excavator from the outset.
• GST: You can typically claim the full GST input tax credit upfront (if registered for GST and using the cash accounting method).
• Tax Deductions: Interest charges on the loan and depreciation of the asset are generally tax-deductible (seek independent tax advice).
• Balloon Payment: Often includes an optional balloon payment at the end of the term to reduce monthly repayments.
• Application: Suitable for businesses looking to preserve cash flow and potentially benefit from immediate tax deductions.

Learn more about specific chattel mortgage structures in our comprehensive Chattel Mortgage Guide.

Commercial Hire Purchase (CHP) for Excavators

Commercial Hire Purchase (CHP) is another common finance solution for heavy equipment finance Australia. Under a CHP agreement, the financier purchases the excavator on behalf of the business, then “hires” it to the business over a set term. The business has full use of the equipment, but ownership only transfers upon the final payment (including any residual value).

Key Features:

• Ownership: The financier owns the asset during the term; ownership transfers upon final payment.
• GST: GST on the purchase price is typically claimed over the life of the loan, not upfront.
• Tax Deductions: The depreciation of the asset is not claimable, but the interest component of the repayments and the depreciation on the asset by the financier are factored into the lease payments.
• Residual Value: Often includes a residual payment at the end, which must be paid to gain ownership.
• Application: Ideal for businesses that want to expense the monthly payments and claim GST over the term, aligning with specific accounting methods.

For a deeper dive into the differences, explore our guide on Comparing Chattel Mortgage vs Hire Purchase.

Case Study 1: Financing a New Excavator

Let’s examine a scenario where an established business opts for a brand-new excavator, focusing on the financial implications and potential ROI over its operational life.

Scenario: Established Civil Works Company

“DigDeep Civil Works” is a well-established civil construction company based in Melbourne, operating for 10 years with strong financials and a consistent pipeline of large-scale infrastructure projects. They currently run a fleet of excavators and are looking to expand their capabilities and reduce downtime by acquiring a new, high-spec 20-tonne excavator.

• Business Profile: Established (10+ years), strong financials, good credit history.
• Equipment: New 20-tonne Komatsu PC200-10M0 excavator.
• Purchase Price: $285,000 (including GST).
• Finance Structure: Chattel Mortgage.
• Deposit: $0 (100% finance, common for strong applicants).
• Indicative Interest Rate: 7.5% p.a. (fixed, example rate for an established business) (indicative only).
• Term: 5 years (60 months).
• Balloon Payment: 20% ($57,000) to reduce monthly repayments.

Financial Breakdown: New Excavator

This example is for illustrative purposes only. Actual rates, terms, repayments, and tax implications depend on lender assessment, your individual circumstances, and current market conditions. Consult your accountant regarding specific tax advice.

Estimated ROI Factors (Illustrative Only):

• Productivity: New machine offers maximum uptime, latest technology, fuel efficiency (e.g., 15-20% more efficient than older models), and operator comfort, leading to potentially higher project completion rates and reduced labour costs.
• Maintenance: Minimal maintenance costs in the first 2-3 years due to warranty and new components. Estimated annual maintenance: $5,000-$8,000.
• Resale Value: After 5 years, a well-maintained 5-year-old Komatsu excavator might retain 50-60% of its initial value, potentially $142,500 - $171,000.
• Tax Benefits (Chattel Mortgage):
  • GST Input Tax Credit: $25,909 (claimable upfront for GST-registered businesses on cash accounting).
  • Depreciation: Significant deductions over the asset’s effective life (e.g., 5-8 years for heavy equipment, consult ATO guidelines and your accountant).
  • Interest Deductions: Full interest component of repayments is tax-deductible.

This example is for illustrative purposes only. Actual rates, terms, repayments, and tax implications depend on lender assessment, your individual circumstances, and current market conditions. Consult your accountant regarding specific tax advice.

Pros of New Excavator Finance

• Reliability & Uptime: New equipment comes with manufacturer warranties, significantly reducing unexpected breakdowns and costly repairs, ensuring maximum operational uptime.
• Latest Technology: Access to advanced features, GPS, telematics, and improved fuel efficiency, which can boost productivity and lower running costs.
• Operator Comfort & Safety: Modern excavators offer superior ergonomics and safety features, potentially increasing operator morale and reducing accident risks.
• Lower Initial Maintenance: Minimal maintenance requirements and costs during the warranty period.
• Stronger Lender Appeal: Established businesses financing new equipment often secure more competitive interest rates and flexible terms from major banks and specialist equipment financiers.
• Higher Resale Value: Generally commands a better resale price compared to older, high-hour machinery.

Cons of New Excavator Finance

• Higher Initial Cost: The most significant drawback is the higher purchase price, leading to larger loan amounts and repayments.
• Depreciation: New equipment experiences rapid depreciation in its early years, particularly in the first year.
• Longer Loan Terms: To make repayments affordable, businesses often opt for longer loan terms, increasing the total interest paid.
• Opportunity Cost: The larger capital outlay could limit funds available for other business investments.

Case Study 2: Financing a Used Excavator

Now, let’s consider a growing landscaping business that chooses to finance a pre-owned excavator, evaluating its viability and ROI.

Scenario: Growing Landscaping Business

“GreenScape Solutions” is a rapidly growing landscaping business in regional Queensland, operating for 2 years. They have secured several new contracts that require a compact 8-tonne excavator, but their budget is tighter than an established civil works firm. They decide to finance a well-maintained used excavator to manage costs and achieve quick operational readiness.

• Business Profile: Growing (2 years), stable revenue, good credit history for its age.
• Equipment: Used 8-tonne Kubota KX080-3 excavator (4 years old, ~3,000 hours).
• Purchase Price: $95,000 (including GST).
• Finance Structure: Chattel Mortgage.
• Deposit: $5,000 (to reduce loan amount and improve lender confidence).
• Indicative Interest Rate: 10.5% p.a. (fixed, example rate for a growing business financing used equipment) (indicative only).
• Term: 3 years (36 months).
• Balloon Payment: 15% ($14,250) to keep monthly repayments manageable.

Financial Breakdown: Used Excavator

This example is for illustrative purposes only. Actual rates, terms, repayments, and tax implications depend on lender assessment, your individual circumstances, and current market conditions. Consult your accountant regarding specific tax advice.

Estimated ROI Factors (Illustrative Only):

• Productivity: Immediate operational use. While not the latest tech, a well-maintained used excavator is highly productive for its intended tasks.
• Maintenance: Higher potential for maintenance costs compared to new. Estimated annual maintenance: $8,000-$12,000 (including potential major service).
• Resale Value: After 3 years (total 7 years old), a well-maintained Kubota might retain 30-40% of its initial new value, or 60-70% of its used purchase price, potentially $57,000 - $66,500.
• Tax Benefits (Chattel Mortgage):
  • GST Input Tax Credit: $8,636 (claimable upfront on financed amount for GST-registered businesses on cash accounting).
  • Depreciation: Deductions over the remaining effective life of the asset.
  • Interest Deductions: Full interest component of repayments is tax-deductible.

This example is for illustrative purposes only. Actual rates, terms, repayments, and tax implications depend on lender assessment, your individual circumstances, and current market conditions. Consult your accountant regarding specific tax advice.

Pros of Used Excavator Finance

• Lower Initial Investment: Significantly lower purchase price means a smaller loan amount and more manageable repayments, freeing up capital for other business needs.
• Faster ROI Potential: With a lower upfront cost, the equipment can start generating revenue and achieving positive ROI much quicker.
• Reduced Depreciation Impact: The steepest depreciation has already occurred, meaning the asset’s value drops less dramatically during your ownership period.
• Immediate Availability: Used excavators are often available immediately, allowing for rapid deployment on new projects.
• Wider Selection: A broader range of models and specifications available within a given budget.

Cons of Used Excavator Finance

• Higher Risk of Maintenance: Older equipment is more prone to breakdowns and requires more frequent maintenance, potentially leading to higher running costs and downtime.
• No Warranty (or Limited): Most used excavators come with little to no warranty, leaving the business responsible for all repair costs.
• Outdated Technology: May lack the latest fuel efficiency, safety features, or advanced functionalities of newer models.
• Potentially Higher Interest Rates: Lenders may view older assets as higher risk, leading to slightly higher interest rates compared to new equipment.
• Valuation Requirements: Lenders may require independent valuations for older used equipment, adding a step to the application process.

Key Factors Influencing Excavator ROI

The decision between new and used excavator finance is multifaceted. Beyond the direct finance costs, several other factors significantly influence the overall ROI.

Business Age and Financial Health

Established businesses with strong financial records, consistent revenue, and a good credit score generally have access to more competitive rates and flexible terms for both new and used equipment. Newer businesses, like “GreenScape Solutions,” might find that used excavator finance is more accessible, though potentially at higher rates, as lenders assess their risk profile. Comparison platforms like Loan Phone can help businesses of all ages find suitable options.

Operational Needs and Usage

Consider the excavator’s intended use. A civil works company undertaking continuous, heavy-duty projects might justify the investment in a new machine for its reliability and advanced features. A landscaping business with intermittent, lighter tasks might find a used model perfectly adequate, achieving its excavator ROI faster due to lower capital cost.

Maintenance and Running Costs

This is a critical differentiator. New excavators come with warranties and typically lower maintenance for the first few years. Used excavators, especially those with high hours, will likely incur higher and more frequent maintenance expenses, including potential major component overhauls. Factor these costs into your cash flow projections.

Tax Implications and Depreciation

Important: Tax benefits depend entirely on your individual business structure, circumstances, and how you use the asset. The information below is general in nature only. Always seek independent advice from a qualified tax professional or accountant before making any financing decisions.

• Depreciation: New equipment typically offers greater depreciation deductions in its early life. For used equipment, the depreciation schedule will depend on its age and remaining effective life. Understanding Understanding Depreciation for Assets is crucial.
• GST: Under a chattel mortgage, businesses can typically claim the full GST input tax credit upfront, regardless of whether the excavator is new or used.
• Instant Asset Write-Off: While subject to government policy changes, this scheme has historically allowed businesses to immediately deduct the full cost of eligible assets, which can significantly impact the effective cost of an excavator. Always verify current ATO guidelines, especially for Instant Asset Write-Off 2026.

Resale Value and Market Demand

While new excavators depreciate rapidly initially, they generally hold a higher residual value over a longer term compared to used models. The make, model, and condition of your excavator will heavily influence its resale value. A popular brand like Komatsu or Kubota, even when used, often commands strong demand in the Australian market.

Comparing New vs. Used Excavator Finance: A Summary

This table provides general comparisons for illustrative purposes only. Actual outcomes will vary based on individual business circumstances, lender assessment, and specific equipment details.

Streamlined Excavator Finance with Loan Phone

Navigating the complexities of excavator finance, whether for new or used equipment, can be time-consuming. Traditional banks often have rigid criteria and slow approval processes, potentially delaying your project. This is where modern comparison platforms like Loan Phone offer a significant advantage.

Loan Phone combines a streamlined online comparison process with access to over 100 lenders, including major banks, specialist equipment financiers, and non-bank lenders. This allows businesses to quickly compare personalised asset finance Australia options, seeing indicative rates and terms tailored to their specific profile and equipment needs.

While our technology-driven platform offers speed and efficiency, we also understand that complex scenarios require human expertise. Our team of specialist brokers is available to provide expert guidance, helping businesses secure finance even for “left-of-centre” solutions or when traditional banks decline. We aim to make the process of securing construction equipment finance as easy as possible, ensuring you get the best possible deal for your business.

Ready to see how fast and easy it can be to compare finance options? Compare your options now.

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Last updated: 2026-02-05