Stop Falling for Equipment Finance Traps: What to Check Before You Sign

Teaser rates, padded brokerage fees and buried clauses are the main traps in equipment finance. Avoid them by comparing total cost over the full term, asking exactly how your broker is paid, and reading every clause on fees, security and guarantees before you sign.

If you only remember one thing: always compare total dollars repaid and effective rate on the same loan amount, term and balloon. How to do that is covered in detail in /insights/true-cost-equipment-finance-rates-fees-residuals-explained.

Checking the fine print on rates, fees and clauses can prevent expensive equipment finance mistakes.

1. Teaser rates and too-good-to-be-true repayments

Teaser rates are discounted interest rates that jump after 12–24 months. They’re common on dealer and solar-style finance. The trap is simple: the initial low rate anchors you, but most of the interest cost arrives later.

What to watch for this week:

1. Step-up rate
   Ask: “What does the rate change to, and when?”
   A 3.99% teaser jumping to 9.49% after 24 months on a 5-year term can make the last 3 years brutally expensive.

2. Total term cost
   On a $120,000 loan over 5 years with a 20% balloon:

   • Option A: flat 7.5% all 5 years
   • Option B: 3.99% for 2 years, then 9.49% for 3 years
     Option B usually wins on the monthly repayment early on, but often loses on total dollars repaid once you add fees and the step-up.

3. Refinance assumptions
   A common sales line is “You’ll just refinance before the jump.”
   In a world where the RBA cash rate has moved from 0.10% to above 4% in a few years (RBA data), that’s a big gamble. Assume you cannot refinance easily, then decide if the deal still stacks up.

If a lender or dealer can’t show you a simple full-term cost comparison in writing, treat that as a red flag.