Two lenders can quote you the same interest rate and still leave you thousands apart by the end of the term. The gap is usually fees, and that is the reason comparison rates exist.
What a comparison rate is
A comparison rate is a single percentage that combines the interest rate with certain upfront and ongoing fees and charges. It is designed to let you compare loan offers more fairly. It is calculated using assumptions about loan size and term, so it will not match your exact deal, and it does not capture every possible cost. Treat it as a useful signal, not the final word. ASIC's MoneySmart site describes how comparison rates work and their limitations.
One practical wrinkle: the rules about showing comparison rates apply mainly to consumer credit. Business finance is often not required to display one, so you may have to ask for the information or calculate your own. That is why knowing the fees is important.
Common fees you might meet
| Fee | What it usually covers |
|---|---|
| Establishment or application fee | Setting up the loan, assessed once upfront |
| Documentation fee | Preparing the contract |
| Security or registration fee | Registering the lender's interest on a public register |
| Monthly account fee | Ongoing administration |
| Early payout or break cost | Charged if you repay early |
| Late payment fee | If a repayment is missed |
| Broker or referral fee | May be paid by the lender or disclosed separately |
Fees vary a lot between lenders, and not all of them apply to every deal. The key is to ask for a complete fee schedule in writing.
Doing the sums yourself
You can make a rough total-cost comparison without special software. For each quote, add up:
- All regular repayments (repayment times number of payments).
- Any balloon at the end.
- All upfront fees.
- All monthly fees across the term.
Then subtract the amount financed. What is left is the approximate cost of credit. Do this for each offer, keeping the term and balloon as similar as you can.
An illustrative example only: a $40,000 loan over five years at 8.5% per year has a monthly repayment of about $820, giving total repayments near $49,200. Add a $500 establishment fee and a $10 monthly fee ($600 over 60 months), and the total cost of credit moves from about $9,200 to about $10,300. A lender quoting 8.25% with a $1,200 establishment fee and $25 monthly fees could end up costing more overall, even though the headline rate is lower. The numbers are made up, but the pattern is real.
Rate types
Most equipment finance is fixed rate, which means the repayment doesn't change during the term. Check, because some products are variable. Also ask whether the rate depends on conditions, such as a minimum deposit or a particular insurance product. If the quote is a "from" rate, the figure you actually receive will depend on your profile and the asset.
Be careful with insurance and add-ons
Lenders or dealers may offer extras such as gap cover, warranty or loan protection. Some may be valuable. Others add cost without much benefit for your situation. Ask for the price of each separately, and whether any is a condition of the loan. If you can decline it, you are free to compare it against alternatives.
Brokers and referrers
Many finance enquiries involve a broker or referrer who is paid by the lender, by you, or both. That is not a problem in itself, but you are entitled to ask how they are paid and which lenders they compare. Clear answers are a good sign.
Taxes and GST
Fees and interest may be treated differently for tax purposes depending on the structure. The ATO publishes business guidance, and your accountant can apply it to your case. Our equipment finance explained page gives a broader overview of how the structures differ.
Takeaway
The headline rate is a starting point. Ask for the fee schedule, add up everything you will pay, and compare totals like for like. This article is general information only and not advice. All numbers are illustrations and real quotes will differ.
