Depreciation is the gradual reduction in the value of a vehicle, equipment or other business asset over time. Lenders consider depreciation when assessing borrowing capacity, risk grade, and the expected resale value at the end of the loan. Depreciation heavily influences Vehicle Finance, Equipment Finance, and Low Doc Asset Finance. Related terms include Residual / Balloon Payment, Term Length, Guarantor. Relevant blogs include Lease vs Buy Equipment and Fast-Track Asset Finance.

Why Depreciation Matters

Depreciation affects how much a lender is willing to finance and the structure of the loan. High-depreciation assets typically attract lower residuals and tighter lending criteria, especially for Working Capital Loans and refinancing scenarios.

How Depreciation Works

• Assets lose value through age, wear and usage.
• Some assets (e.g. technology equipment) depreciate faster than vehicles.
• Lenders predict the future value of the asset when structuring approvals.
• Depreciation impacts resale value, refinancing options and residual settings.

Official info: ato.gov.au