Finance question
What happens at the end of an equipment finance term?
It depends on the structure. On a chattel mortgage, the most common setup, you own the asset outright once the final payment clears. If you set a balloon, you settle that lump sum at the end, either by paying it, refinancing it or selling the asset. Nothing is a surprise, because it is all set at the start.
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The short answer
How the deal ends is decided at the start
Most equipment finance is a chattel mortgage. You use and effectively own the asset from day one, the lender holds security over it, and when the last repayment clears, that security is released and the asset is fully yours. There is no handback and no final decision to make, you simply keep the gear.
A balloon changes the end point. A balloon, sometimes called a residual, is a chunk of the price parked at the end of the term to lower your monthly repayments. When the term finishes you settle that amount, by paying it out, refinancing it into a new term or selling the asset to cover it. It is set when you sign, not sprung on you later.
Other structures end differently. A lease or rental may give you the option to buy the asset, extend or return it at the end, depending on the agreement. The key is knowing which structure you are on before you sign, so the ending suits how long you plan to keep the asset and how you want your cash flow to run.
How your term can end
The common paths at the finish line.
Own it outright
On a chattel mortgage, the asset is yours after the last payment.
Pay the balloon
Settle the residual lump sum from cash if you have set one.
Refinance the balloon
Roll the residual into a new term to keep repayments smooth.
Sell or upgrade
Sell the asset to clear the balloon, or trade up to newer gear.
Why the ending is in your control
Structure set upfront
Chattel mortgage or balloon, you choose the ending before you sign.
No surprises
Any balloon amount is known from day one, not revealed at the end.
Options at the finish
Pay, refinance, sell or upgrade. The path stays flexible.
A real example
A courier finances a $45,000 van over five years with a balloon to keep repayments low. At the end, the van is worth more than the balloon, so he sells it, clears the residual and puts the difference toward a newer van on a fresh facility. Illustrative only.
Common questions
Frequently asked questions
Do I automatically own the asset at the end?
On a chattel mortgage, yes. Once the final payment clears, the lender's security is released and the asset is yours.
What is a balloon and when do I pay it?
A balloon is part of the price parked at the end to lower repayments. You settle it at the end of the term, by paying, refinancing or selling the asset.
Can I refinance the balloon instead of paying it?
Often yes. Many businesses roll the balloon into a new term to keep repayments steady rather than pay a lump sum.
Can I pay the finance out early?
Usually yes, though a payout figure and any early termination costs depend on the lender and structure. We can check before you sign.