A Depreciating Asset is any business asset that declines in value over time due to age, wear, usage or technological changes. Common depreciating assets include vehicles, trucks, machinery, tools, medical devices, IT equipment and hospitality equipment. Depreciation is central to Equipment Finance, Vehicle Finance, and Low Doc Asset Finance. Related glossary terms: Useful Life, Asset Valuation, Residual Value. Relevant blogs: Are Low Doc Equipment Loans Worth It?, Equipment Finance Application Mistakes.

Why Depreciating Assets Matter

Lenders analyse depreciation to understand risk, resale value, and how long the asset will remain productive. Faster depreciation means higher lending risk, shorter maximum loan terms, and sometimes higher interest rates. Depreciation affects:

• Maximum finance term
• Interest rates
• Balloon/residual values
• Eligibility for Low Doc products
• Borrowing capacity for asset-heavy industries

Slower depreciation = stronger lending position.

Examples of Depreciating Assets

• Vehicles: moderate depreciation (8–12 years useful life)
• Trucks & prime movers: slower depreciation due to commercial use
• Construction equipment: slow depreciation (12–20 years)
• Medical equipment: varies by technology (5–12 years)
• IT equipment: fast depreciation (2–5 years)
• Hospitality appliances: moderate depreciation (5–10 years)

Depreciation also affects tax deductions and asset write-off strategies.

Official reference: ato.gov.au