What Is LVR in Asset Finance? (2026): How Lenders Calculate Loan-to-Value Ratios
LVR in asset finance for business owners – Switchboard Finance
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Asset finance · Deposits · Valuation
In asset finance the loan to value ratio is not a rate input, it is the deposit setter. It decides how much of the purchase a lender will fund, and it moves with the asset class, the age of the gear and how you are buying it.
Quick Answer
LVR in asset finance is the share of an asset's accepted value a lender will advance, and it is what sets your deposit before rate is ever discussed. The accepted value is the lender's figure, not the sticker price, so the same asset can carry different deposits for different buyers. See the LVR glossary entry for the term itself.
Also called: asset finance LVR, equipment finance LVR, advance rate.
How much will a lender actually advance on an asset?
Most asset finance sits between roughly 80 and 100 per cent of the value a lender is prepared to recognise, and the band you land in is set by the asset class before anything about you is assessed. A new vehicle from a dealer sits at the generous end because the invoice is clean and the resale market is deep. A specialised unit bought privately sits at the tight end because the lender is relying on someone else's inspection and a thinner pool of buyers if it ever has to sell.
The band is the starting point, not the answer. Your profile, the structure you ask for and the quality of the file all move you inside it, and sometimes out of it. What follows is the shape we see across the deals we place, so you can work out roughly where a purchase is likely to sit before you commit to it.
| Asset class | Indicative advance against accepted value | Typical deposit position |
|---|---|---|
| New vehicle or ute from a dealer | Up to the full invoice, with on-road costs often able to ride along | Frequently nil for an established, property backed borrower |
| Used vehicle from a dealer | Up to the full accepted value, tightening as the vehicle ages | Nil to around 10 per cent |
| Vehicle or gear bought private sale | Roughly 80 to 90 per cent of the verified value | Around 10 to 20 per cent is common |
| Truck, prime mover or trailer | Up to the full invoice when new, lower on used units | Nil when established, 10 to 30 per cent on used or newer operators |
| Yellow goods and earthmoving plant | Up to the full invoice on mainstream makes, less on specialised units | Nil to around 15 per cent, more on unusual gear |
| IT, fitout and other soft assets | Often the full invoice | Usually nil, traded for a shorter term and a lower residual |
Indicative bands drawn from deals we have placed, as at August 2026. They are not lender policy, not a quote and not an offer, and every figure moves with lender appetite and your circumstances at the time of application. General information only, not financial advice.
From our broking, indicative
Across the asset finance files we place, three patterns show up often enough to plan around.
- New vehicle chattel mortgages routinely settle above the vehicle price once registration, stamp duty and delivery are funded alongside it, which surprises people who expect the loan to stop at the drive away figure.
- Used gear bought private sale is usually capped nearer 80 to 90 per cent of the verified value, and the gap becomes the deposit whether or not the seller has agreed a price already.
- Soft assets such as fitout and IT often fund at the full invoice with a director guarantee, and the lender takes its comfort back through a shorter term and a lower residual rather than through a deposit.
Indicative only, based on deals we have placed, as at August 2026. Not a quote and not an offer. Actual terms depend on lender policy and your circumstances at the time of application. Not financial advice.
Can you finance 100 per cent of a vehicle or equipment purchase?
Yes, full funding is normal rather than exceptional for an established business buying a mainstream asset through a dealer. The point people miss is that the amount financed and the price of the asset are two different numbers. On a chattel mortgage, registration, stamp duty, delivery and related on-road costs can usually be funded alongside the vehicle, so the total advance can sit above the vehicle price on its own while the lender still treats the deal as fully secured.
That is also why comparing a friend's deal to yours by the loan amount alone tells you nothing. One of you may have rolled the on-road costs in and the other may have paid them separately. If you want a clean read on whether full funding is realistic for your file, our fast track asset finance post covers what an established ABN can usually expect.
How does a balloon change what you borrow and repay?
A balloon lowers your monthly repayment and leaves a lump sum owing at the end of the term, and it does not change how much the lender will advance today. This is the single most common confusion we see on asset finance enquiries. The advance is set by value and profile. The balloon is set by the term and by what the asset is expected to be worth when the term ends, which is why the ceiling falls away as terms get longer and assets get older.
| Loan term | Vehicles, trucks and plant | Soft assets such as IT and fitout |
|---|---|---|
| 24 months or less | Around 50 per cent | Around 20 per cent |
| 36 months | Around 40 per cent | Around 10 per cent |
| 48 months | Around 35 per cent | Around 10 per cent |
| 60 months | Around 30 per cent | Usually nil |
| 72 to 84 months | Nil to around 30 per cent, falling with age | Usually not offered |
| Asset over 12 years old at end of term | Usually nil | Usually nil |
Indicative residual ceilings drawn from deals we have placed, as at August 2026. Not lender policy, not a quote and not an offer. General information only, not financial advice.
The balloon matters at the end, not the beginning. When the term runs out you either pay it, refinance it or sell the asset, and what you owe at that moment is the payout figure rather than the balloon on its own. Our post on what a payout figure actually is covers that.
When do lenders ask for a deposit on an equipment loan?
A deposit appears when the lender wants a safer position, not because a deposit is standard. Most clean equipment purchases settle without one. When money down is requested, it is almost always answering a specific concern, and once you can name the concern you can usually work out whether a different lender or a different structure removes it.
Deposit usually not required
- Established ABN with a trading history behind it
- Borrower owns property, whether or not it is used as security
- Mainstream asset bought through a licensed dealer
- Clean conduct on the business bank statements
- Asset with a deep and obvious resale market
Deposit usually requested
- Borrower does not own property
- ABN registered recently or trading history is thin
- Private sale, where value has to be verified independently
- Older asset, or one close to an age cap at end of term
- Specialised or purpose built unit that is slow to resell
Not owning property is the one that catches most self employed buyers out, because nothing about the deal itself has changed. If that is your position, our low doc vehicle finance page covers how the file is assessed, and our comparison of deposit structures covers whether a trade in does the same job as cash.
Does LVR work differently on a used asset?
On a used asset the lender lends against a value it has verified, not against the price you negotiated, and that difference is where most unexpected deposits come from. A dealer sale carries a tax invoice from a licensed seller, so the invoice usually does the work. A private sale has no such document, so the lender falls back on an inspection or a market valuation and sets the advance against whatever that comes back at.
If the verified figure lands under the agreed price, the shortfall is yours to cover. That is not the lender rejecting the deal, it is the lender declining to fund a gap between what you agreed to pay and what the asset supports. Building an inspection step into your timeline before you commit is the practical answer, and our valuation bands post covers how assets get bucketed before that point.
How does the age of an asset change the deposit?
Age tightens the advance because lenders look at what the asset will be worth at the end of the term, not what it is worth today. An older unit reaches the point where a lender expects little or no residual value sooner, so the advance comes down, the term shortens and the residual gets squeezed towards nil. The same asset bought three years earlier can sit in an entirely different band.
Age caps themselves are a separate question, and they are covered properly on our asset finance valuation bands page rather than repeated here. What matters for your deposit is the interaction. An asset that is fine on age but tight on term will show up as a request for money down rather than as a decline, which is why a deposit request is often a term problem wearing a different hat.
Does a chattel mortgage or a lease change the amount financed?
The structure changes who owns the asset and how the tax works, and it can change what gets funded alongside the asset, but it does not move the underlying view of value. A chattel mortgage puts the asset on your balance sheet from settlement with the lender holding security over it, and it is the structure that most naturally carries on-road costs and related items into the funded amount. A lease keeps the asset with the financier and you pay for use of it, which changes the accounting and usually the treatment of extras.
For most self employed buyers the deposit question is answered before the structure question, because both structures are looking at the same asset and the same file. Where the structure genuinely matters is tax, and that sits with your accountant and with the ATO guidance on depreciation and capital allowances rather than with your broker. Our low doc versus full doc comparison covers what changes on the assessment side.
What can you do if the deposit comes back higher than you expected?
Start with why the lender moved rather than with the number itself, because the same asset produces different deposits for different files and the fix depends entirely on which lever moved. In practice the deposit is the first thing a lender adjusts when it wants a safer structure, which is why it usually lands before any conversation about pricing has happened.
| Borrower profile | The asset | What moves the ratio | What changes first |
|---|---|---|---|
| Established ABN, property backed | Same late model ute | Clean file and a clear servicing story | Little to no deposit pressure |
| Mid strength file | Same late model ute | More caution on profile or on the structure asked for | A moderate deposit appears |
| Newer or more complex file | Same late model ute | Tighter comfort on risk or on usable value | A higher deposit, before pricing is discussed |
Three moves usually help. Present the file properly, because a lender that cannot follow your income will price for the uncertainty. Test a second lender, because appetite for your asset class varies more than most buyers expect. And check whether the structure you asked for is the one that suits the asset, since a shorter term with a smaller residual sometimes removes the deposit entirely. Our post on what conditional approval actually means is worth reading before you treat a deposit request as final, and the Business Owners Finance Hub collects the rest of the asset finance material in one place.
LVR in asset finance is the lender's view of value expressed as a deposit. The asset class sets the band, the file moves you inside it, and the deposit is the first lever the lender pulls when it wants a safer position. A new dealer purchase for an established, property backed borrower will usually fund in full, on-road costs included. A private sale, an older unit or a borrower without property will usually attract a contribution, and none of that is a comment on the quality of the deal.
Key takeaway: work out which lever moved your deposit before you accept it, because a different lender or a different term often removes it.Frequently Asked Questions
LVR in asset finance is the share of an asset's accepted value that a lender will advance against it. The accepted value is not always the price you agreed, which is why two buyers of the same vehicle can be asked for different deposits. Our glossary entry on LVR covers the term itself, and this page covers the mechanics behind it.
Full funding on a new work vehicle is common for an established, asset backed borrower buying through a dealer. On a chattel mortgage the invoice, and often the on-road costs attached to it, can be funded together, which is why the amount financed can sit above the drive away price of the vehicle alone. It is a lender by lender position, not a guarantee.
Many equipment purchases settle with no deposit at all, and a deposit appears when the lender wants a safer position rather than as a standard requirement. The usual triggers are a borrower who does not own property, a young business, a private sale, an older asset or a specialised unit with a thin resale market. Our equipment finance page sets out what a lender looks at before it asks for money down.
Private sale purchases are usually funded at a lower share of value than the same asset bought through a dealer. There is no tax invoice from a licensed seller, so the lender relies on an inspection or a market valuation and lends against the verified figure. Expect a contribution and an inspection step, as covered in our post on deposit structures.
A balloon does not reduce your deposit, it reduces your monthly repayment and leaves an amount owing at the end of the term. The deposit is set by how much of the value the lender will advance, and the balloon is set by the term and the asset's expected value at the end of it. Our post on payout figures explains what that residual looks like when you come to exit.
Lenders value used commercial assets against a market guide or an inspection rather than the asking price, and the advance is set against that figure. Hours, service history, make and how easily the unit resells all move the number. Our valuation bands post covers how assets get bucketed before pricing or deposit is discussed.
Not owning property is one of the most common reasons a deposit appears on an otherwise clean file. Lenders treat a property backed borrower as a lower risk and will often fund the full invoice, while a non property backed borrower is more likely to be asked to contribute. Our low doc vehicle finance page covers how that is assessed for self employed borrowers.
A deposit rises after assessment when the lender values the asset below the agreed price, or when something in the file moves the borrower into a tighter tier. It is a structural response, not a judgement on the deal, and the usual fix is a different lender, a different structure or a cleaner presentation of the same purchase. Our post on conditional approval explains what that stage is really testing.
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