Overview: equity, value and payout
In asset refinance, equity is the gap between a realistic market value for your asset and the amount you still owe on it (your payout). Lenders then apply a maximum LVR to decide how much of that value they are comfortable refinancing.
- Equity = Market value − Current payout
- Equity % = Equity ÷ Market value
- Refinance amount is typically capped at Market value × Max LVR
If your payout is higher than the workable refinance amount, you may need to contribute cash, extend term, set a residual/balloon, or choose a different product. We explain these options below.
How lenders look at equity (LVR basics)
Lenders set a maximum LVR based on the asset type, age, condition, resale profile, and your business profile. Stronger files can be approved at higher LVRs; higher-risk files are usually capped lower.
Common valuation approaches include price guides (e.g., industry data such as RedBook for vehicles), dealer or supplier quotes, photos and serial checks, or a formal valuer for specialised machinery. Lenders generally use the lower of purchase price, payout, or their accepted value benchmark.
Typical equity needed by asset type
These are indicative ranges in Australia. The exact LVR you qualify for depends on lender policy and your profile.
- Passenger and light commercial vehicles (newer, mainstream): up to ~90% LVR (equity ~10%)
- Trucks and trailers (prime movers, mid-age): ~80–90% LVR (equity ~10–20%)
- Yellow goods and earthmoving (excavators, loaders): ~70–85% LVR (equity ~15–30%)
- Specialised or older machinery: ~60–80% LVR (equity ~20–40%)
- IT and rapidly depreciating equipment: ~60–80% LVR (equity ~20–40%)
Assets with strong resale and current demand can support higher LVRs; older or niche assets generally require more equity.
Quick way to estimate your equity
- Get your realistic market value (recent sale data, price guides, dealer appraisals).
- Confirm your exact payout figure with your current lender.
- Estimate lender cap: Market value × likely LVR (from the ranges above).
- Compare figures:
- If lender cap ≥ payout: your equity is likely sufficient.
- If lender cap < payout: you’re short and need a strategy (see below).
Example: Truck market value $160,000. Payout $145,000. If your likely LVR is 85%, cap is $136,000. You’re short by $9,000 and need to bridge the gap via structure or cash.
What changes the equity you’ll need?
- Asset age and condition: older or high hours/km usually need more equity.
- Business profile: time trading, ABN/GST status, and stability can lift or lower LVR caps.
- Credit history: recent arrears, defaults or ATO debt typically reduce LVR tolerance.
- Documentation strength: full-doc vs low-doc can influence LVR and pricing.
- Use case and industry: heavy use or niche applications may need extra buffer.
- Valuation method: conservative valuations reduce the usable refinance amount.
Improving any of these can reduce the equity you need to contribute.
If you don’t have enough equity
Short on equity doesn’t have to be a dead end. Common solutions include:
- Term strategy: extend the term to reduce repayments and improve serviceability.
- Residual/balloon: set a commercial residual to reshape the repayment profile.
- Top-up cash: contribute the shortfall amount to meet lender cap.
- Multiple assets: bundle a stronger- equity asset to balance an older one.
- Different product: consider a finance lease or hire purchase if policy fit is better.
- Staged plan: reduce payout for a few months, then refinance when equity improves.
GST and tax when refinancing assets
Refinancing typically doesn’t trigger GST on the asset itself, but GST and tax can apply to fees, interest, and how the facility is structured. Always confirm with your accountant.
GST treatment for asset refinance · Tax implications to consider
Get help to check your equity and options
Want a clear view on the equity needed for your asset refinance, and how to structure your deal? Send an enquiry and we’ll map out lender-fit, LVR expectations, and next steps.
Frequently asked questions
Do you always need equity to refinance an asset?
Usually yes. Most lenders cap LVR between ~60–90% depending on the asset and your profile. If your payout is higher than the lender’s cap, you’ll need a solution such as cash contribution, a residual, term change, or a different product.
How much equity is typically needed?
As a guide, passenger/light commercial vehicles may proceed with ~10% equity, trucks ~10–20%, yellow goods and specialised machinery ~15–40%. Exact equity depends on age, condition, resale demand, documentation and credit strength.
What if I have little or negative equity?
It can still be workable. Options include a partial cash top-up, adding a residual/balloon, extending term, bundling assets, or delaying refinance until payout reduces. A quick assessment will show the most efficient path.
How do lenders value my asset?
They use accepted benchmarks like industry price guides, dealer appraisals, photos and serial checks, or formal valuations for specialised items. Lenders adopt conservative values and the lower of purchase price or market value if there’s a gap.
Which documents help my equity case?
Clear photos and specs, service history, proof of condition, exact payout letter, recent bank statements, BAS/financials (where applicable) and evidence of stable trading all help support higher LVR outcomes.
Will a balloon/residual reduce the equity I need?
It doesn’t change the valuation, but it can reshape repayments and help a deal fit within lender parameters. Residual sizing must be commercially reasonable for the asset’s projected value at term end.
Key takeaway
The equity needed for asset refinance depends on asset type, valuation, your payout and the lender’s LVR. Use realistic values, calculate your gap early, and adjust structure if you’re short. A quick expert review can save time and improve approval fit.
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