Overview
A balloon payment is a lump sum due at the end of your earthmoving equipment loan. In practice, choosing a balloon shifts part of the principal to the end so your regular repayments are lower during the term.
This is common for excavators, loaders, graders, dozers and compact earthmoving gear where businesses want to preserve cash flow while matching repayments to revenue the machine generates.
- Typical balloon range: 10%–30% of the financed amount (sometimes up to 40% on newer assets and strong files)
- Typical terms: 2–5 years, linked to age, hours and resale outlook
- Works with: chattel mortgage, hire purchase, and lease structures (lease uses ATO‑guided residuals)
How a balloon changes your repayments
Adding a balloon payment lowers your monthly or fortnightly repayments and leaves a balance to deal with at term‑end. The trade‑off is that you usually pay more interest over the life of the loan because more principal remains outstanding for longer.
What lenders look at
- Asset quality and resale: make, model, age, hours, service history
- Term vs. balloon fit: does the balloon align with realistic future value?
- Borrower strength: time in business, cash flow, credit profile, ABN/GST status
- Exit plan: pay out, refinance, or trade/upgrade at the end
Worked examples (illustrative only)
Example only, not a quote. Assumes $350,000 excavator, 60‑month term, 9.5% p.a. interest. Actual pricing and repayments vary by lender and file.
- No balloon: approx. $7,445 per month
- 20% balloon ($70,000): approx. $6,525 per month, with $70,000 due at term‑end
The 20% balloon trims monthly cash outflow by around $920 but leaves a lump sum to plan for. Many businesses clear this by trade‑in, sale, or refinancing the balloon.
Key considerations before setting a balloon
- Resale reality: set a balloon that the machine is likely to cover in a normal sale or trade scenario.
- Usage and depreciation: high‑hour or harsh‑use fleets may require a lower balloon.
- Cash flow vs total cost: a bigger balloon lowers repayments but can increase total interest paid.
- Term fit: longer terms typically mean more conservative balloons on older gear.
- Credit strength: stronger files often have more room to set higher balloons.
End‑of‑term options
- Pay the balloon and keep the machine
- Refinance the balloon into a new term to smooth cash flow
- Trade in or sell the asset, use proceeds to clear the balloon, and upgrade if needed
How to choose the right balloon amount
- Estimate conservative resale at term‑end based on age/hours and market data.
- Stress‑test cash flow with and without a balloon to see sensitivity.
- Match the balloon to your upgrade cycle (e.g., 3–5 year replacement).
- Confirm lender caps for your asset, term and profile.
- Check tax/GST treatment for your chosen product with your accountant.
Approval and documentation
A proposed balloon can change what a lender wants to see. Expect some combination of:
- ABN/GST details, time‑in‑business and financials or bank statements
- Asset invoice/quote, specs, age, hours and service history
- Purpose and exit plan (pay, refinance, or trade/upgrade)
Clear documentation supports a realistic balloon and reduces approval friction.
Alternatives if a balloon isn’t the right fit
- Longer term with a smaller or zero balloon (subject to asset age)
- Add a deposit or trade‑in to reduce the amount financed
- Seasonal or structured repayments (where available)
- Refinance an existing asset to release cash instead of using a large balloon
Get help with this topic
Want a quick comparison of repayments with and without a balloon for your earthmoving gear? Send an enquiry and we’ll outline options that fit your asset, term and cash flow.
Information on this page is general and not financial or tax advice. Confirm product, tax and GST treatment with your adviser.
Frequently asked questions
What is a balloon payment in earthmoving equipment finance?
A balloon payment is a lump sum due at the end of your loan that lowers repayments during the term. It’s commonly used for excavators, loaders, graders and dozers.
How big can the balloon be?
10%–30% is common; up to 40% may be possible for newer assets and strong files. Lender caps depend on term, asset age/hours and expected resale value.
Are balloon and residual the same?
They’re related. Chattel mortgage and hire purchase use balloons with lender policy flexibility. Finance leases use residuals that must align with ATO guidelines for the chosen term.
Is GST payable on the balloon?
With a chattel mortgage, GST is generally claimable upfront on the purchase price if you’re registered. The balloon is part of the financed principal, so there’s typically no extra GST at payout. Confirm with your accountant.
What are my options at the end of the term?
Pay the balloon, refinance it, or trade/sell the asset and use the proceeds to clear the balloon—often while upgrading.
Does choosing a larger balloon increase interest cost?
Yes. Repayments fall, but you usually pay more interest over the life of the loan because more principal remains outstanding.
Can I have a 0% balloon?
Yes. Many businesses choose no balloon to fully pay off the asset by term‑end.
Can I refinance just the balloon?
Yes. You can refinance the balloon into a new term—useful if you’re keeping the machine or smoothing cash flow.
Final takeaway
The right earthmoving equipment finance balloon payment balances cash flow now with a realistic exit later. Set a balloon that fits the machine’s future value, your term, and your upgrade or payout plan.
If you’d like tailored numbers for your asset, we can model repayments with different balloons and terms so you can choose confidently.