A new ute, a second excavator, a coffee machine, a fleet of laptops. Every business eventually faces the same decision: pay cash, lease it, take the dealer’s finance offer, or arrange a loan and buy it yourself? Each has a place. This guide lays out the trade-offs so you can pick deliberately.
The four approaches
1. Buy outright with cash
Pros: no finance costs; you own it immediately; simple.
Cons: the cash is gone — and cash is what gets a business through a slow month, a late payer or an IRD bill. A $70,000 cash purchase can leave a healthy business exposed.
Suits: businesses with genuinely surplus cash, and smaller purchases.
2. Operating lease
You pay to use the asset for a set period, then return it (or upgrade).
Pros: predictable monthly cost; no large upfront outlay; easy to upgrade; maintenance sometimes bundled; payments are generally deductible as an expense.
Cons: you don’t own the asset; usually more expensive over the long term; restrictions on use, kilometres or modifications; early exit can be costly.
Suits: assets that date quickly — IT, office equipment, some vehicles on short replacement cycles.
3. Dealer or supplier finance (including hire purchase)
The seller arranges finance at the point of sale.
Pros: convenient; sometimes promotional offers.
Cons: ties you to that seller and that asset; may not cover used, private or auction purchases; less room to negotiate price when finance is bundled.
Suits: straightforward new purchases where the offer genuinely stacks up.
4. Borrow and buy
You arrange a business loan and buy the asset as a cash buyer.
Pros: ownership from day one; buy new or used, from a dealer, privately or at auction; negotiate as a cash buyer; include fit-out costs in the same loan; the asset can be sold whenever you like.
Cons: you carry the resale risk; finance cost applies; property-secured loans put property on the line.
Suits: long-life assets, second-hand or private purchases, and buyers who want flexibility.
Side-by-side
| Cash | Operating lease | Dealer finance | Borrow & buy | |
|---|---|---|---|---|
| Upfront cash | High | Low | Low–medium | Low |
| Own the asset? | Yes | No | At the end (HP) | Yes |
| Buy used or private? | Yes | Rarely | Limited | Yes |
| Upgrade flexibility | Sell and rebuy | High | Low | Sell and rebuy |
| Long-run cost | Lowest | Usually highest | Varies | Varies |
| Working capital impact | Large | Small | Small | Small |
Tax differences (in brief)
- Owned assets (cash, hire purchase, or borrowed) are generally depreciated, and interest on borrowing is generally deductible.
- Investment Boost — qualifying new assets (or assets new to New Zealand) first available for use on or after 22 May 2025 can attract a 20% up-front deduction. Second-hand assets sourced within New Zealand don’t qualify. See depreciation and buying before 31 March.
- Operating lease payments are generally deductible as an expense.
- Finance leases and hire purchase are generally treated like a purchase for tax.
The detail matters — confirm the treatment of any specific arrangement with your accountant.
A simple decision framework
Ask four questions:
- How long will I keep it? Five years or more → owning usually wins. Two or three years → leasing becomes competitive.
- How fast does it date? Tech and some vehicles → lease. Plant and machinery → own.
- How much cash do I need to keep? If paying cash leaves less than two months of outgoings in the bank, fund it.
- Where am I buying? Used, private or auction → borrow and buy.
Example scenarios
Example scenarios — generic and illustrative.
- A Tauranga plumber replacing a van. Keeps vans six-plus years, wants a well-kept used van from a private seller. Borrow and buy.
- A Wellington design studio refreshing laptops. Replaces every three years, wants predictable costs. Lease.
- A Canterbury contractor buying an imported used excavator. Long working life, new to New Zealand so potentially eligible for Investment Boost. Borrow and buy, and check the tax treatment.
- A cash-rich accountant buying a $2,500 printer. Pay cash.
Before you commit
- Get the cash price before discussing finance.
- For used purchases, run a PPSR search — see our PPSR guide.
- Compare the total cost of each option over the time you’ll keep the asset.
- Check early exit and end-of-term conditions.
The hidden cost: what cash is worth to your business
The “cheapest” option on paper — paying cash — ignores what that cash could otherwise do. If $60,000 in the bank lets you take on a bigger contract, buy stock at a discount or avoid IRD penalties in a slow month, spending it on a vehicle has a real cost. A useful test: after the purchase, would you still have at least one full cycle of outgoings in the bank? Our cash-flow gap calculator shows what that cushion should be for your business.
Funding through Loanster
Loanster arranges business loans you can use to buy equipment and vehicles as a cash buyer: property-secured from $20,000 up to $1m, or unsecured based on turnover for businesses usually trading six months or more. See equipment funding and business vehicle funding, or start a 60-second enquiry.