What rates and fees should I expect for equipment finance?
Short answer: equipment finance costs vary widely depending on the finance type, the lender, your business credit profile and the asset being financed. Expect headline interest rates anywhere from low single digits for low-risk, secured deals up to high teens or more for higher-risk or unsecured arrangements, with additional fees for arrangement, documentation and optional services. Read on for a detailed, practical breakdown and steps to compare offers so you can get a Quote quickly and confidently.
How equipment finance pricing is set
Key factors that determine rates
Lenders price equipment finance based on risk, asset type, loan term and the business’s financial strength. A strong trading history, good credit profile and financeable collateral typically secure better rates. Conversely, limited trading history, seasonal income or high-risk asset classes usually push rates higher.
Common finance structures
The main structures are hire purchase (HP), finance lease, operating lease, chattel mortgage and asset refinance. Each structure allocates ownership, VAT treatment and residual value differently, which affects cost. Understanding the structure helps you compare like-for-like offers.
When structure matters
HP often has fixed payments and ends with ownership, while a finance lease keeps ownership with the lender and may charge for return condition. Operating leases can look cheaper short-term but may include mileage, maintenance or return charges. Ask lenders for a full payment schedule to compare total cost.
How interest and fees interact
An ostensibly low interest rate can be offset by high arrangement fees or a large balloon payment at maturity. APR or equivalent cost of credit helps compare deals but always check fees, early repayment terms and residual liabilities. For business borrowers, quoting examples and total payable over the term gives clearer comparisons.
Typical interest rate ranges (UK context)
Low-risk secured deals
For well-established SMEs financing standard equipment, secured deals can start in the low single digits above base rate. In practice, many UK asset finance deals sit in the range of about 3%–8% annually for favourable credit and newer assets. Rates are subject to change with market base rates and lender pricing.
Mid-range and specialist cases
Smaller firms, older assets or specialist equipment often face higher pricing, commonly between 8%–15%. Specialist sectors such as construction or haulage may see premium pricing where asset lifecycle or market resale value is uncertain. Vendor-backed or manufacturer schemes can sometimes offer competitive rates for specific equipment types.
Higher-risk or unsecured finance
Unsecured equipment finance and deals for higher-risk borrowers may reach high teens or exceed 20% per annum. Such deals may be used for short-term cashflow needs or businesses without sufficient collateral. Consider whether the higher cost is justified by the business benefit of the asset.
Short-term vs long-term pricing
Shorter terms can carry higher monthly repayments but lower total interest; longer terms reduce monthly cost but increase total interest and may leave residual risk at maturity. Balloon payments reduce monthly cost but add a lump sum at the end that affects effective cost. Ask lenders for both monthly payment and total payable figures.
Typical fees and charges to expect
Arrangement / origination fees
Arrangement fees are common and typically range from a small fixed amount to a percentage of the facility. Expect anywhere from a few hundred pounds up to 1–3% of the financed amount for many commercial deals. Some lenders include fees in the finance amount while others add them on top, so clarify this when comparing quotes.
Documentation and legal fees
Documentation or legal fees cover paperwork and registration (for example, a charge on the asset or Companies House filings). These are often modest — commonly a few hundred pounds — but can be higher for complex transactions. Request an itemised breakdown before signing.
Maintenance, insurance and service charges
Contracts sometimes require full-maintenance packages or insurance which increase monthly cost but simplify budgeting. Maintenance-inclusive leases may be attractive for equipment with regular servicing needs. Ensure the contract specifies who is responsible for repairs, insurance and compliance costs.
Early repayment, termination and late fees
Early settlement charges can include a breakage fee to compensate the lender for lost interest and are often calculated using a formula. Contract termination or repossession costs can also be significant if you default. Late payment fees vary; lenders must disclose these, and you should factor them into contingency planning.
How to compare offers and calculate true cost
Compare total payable, not just headline rate
Request a full repayment schedule showing interest, fees, VAT treatment and any residual or balloon payments. Calculate total cost and effective annualised rate to compare offers on a like-for-like basis. Use examples for your exact asset value and term to avoid surprises.
Ask for worked examples and APR equivalents
Although APR is consumer-based, many lenders provide an equivalent effective rate or total cost illustration for business deals on request. Ask for a written example including all fees, early repayment terms and end-of-term options. A side-by-side comparison table of two or three offers makes decision-making easier.
Check tax and accounting impacts
Different structures affect VAT recovery, capital allowances and balance sheet treatment. For example, hire purchase often allows capital allowances, while operating leases can keep liabilities off the balance sheet. Consult an accountant about the tax impact before choosing the structure that suits your cashflow and reporting needs.
Practical checklist before you sign
- Confirm total payable and monthly payments including fees.
- Clarify who owns and insures the asset during the term.
- Check early repayment and termination conditions in writing.
- Request references or read lender reviews if unfamiliar.
If you want a quick, tailored comparison, submit a Quick Quote and Decision in Principle through our platform to see compatible lenders and indicative pricing.
How Best Business Loans helps, compliance notes and key takeaways
How we support your equipment finance journey
Best Business Loans does not supply finance directly; we match established UK businesses with lenders and brokers who actively lend. Our AI-driven Quick Quote helps you gather indicative rates and fee structures quickly so you can compare real, relevant offers. Completing the form is free, confidential and non-binding.
Regulatory and advertising clarity
We aim to provide clear, fair and non-misleading information in line with FCA and ASA expectations for financial promotions. We always encourage businesses to seek specific lender terms and independent accounting or legal advice before committing. Our guides and matched providers supply the detailed product literature you need to make informed decisions.
Next steps — get a Quick Quote
To see indicative rates and fees based on your business and the equipment you plan to buy, submit a Quick Quote now and let our matching system introduce you to relevant lenders or brokers. You can also learn more about equipment finance options on our dedicated page: equipment finance.
Key takeaways
- Rates typically range from low single digits to high teens or more depending on risk and finance type.
- Fees — arrangement, documentation, maintenance and early repayment — can materially change the effective cost.
- Compare total payable, request worked examples and check tax/accounting impact before signing.
- Best Business Loans helps you get matched with lenders and brokers for free so you can compare accurate offers.
Author & credentials
Best Business Loans editorial team — experienced in UK commercial finance and asset funding. Our content is informed by industry practice and designed to help established SMEs make practical, compliant decisions. For questions, email hello@bestbusinessloans.ai.