Can you sell business equipment that still has finance owing on it?

Often, yes. If your business owns the equipment under a chattel mortgage, you can sell it, as long as the lender is paid out at or before settlement and its PPSR registration is removed. If the equipment is leased or rented, the financier owns it and it isn’t yours to sell. If the price falls short of the payout, you cover the gap.

Plenty of businesses end up here. A contract finishes and a machine sits idle. A truck is too small for the new route. A partner leaves and the gear needs to be split. The finance doesn’t stop you selling, but it does decide how the sale has to run.

Do you actually own the equipment you want to sell?

Start with the contract, not the classifieds. The type of finance decides whether a sale is yours to make.

Finance type	Who owns the asset during the term	Can you sell it?
Chattel mortgage	Your business, from settlement	Yes, once the lender is paid out
Commercial hire purchase	The financier, until the final payment	Not until you’ve made the final payment and title passes
Finance lease	The financier	No; you’d need to pay out or buy it at the residual first
Operating lease or rental	The financier	No; it goes back at the end of the term
Loan secured by property	Your business owns the asset outright	Yes; the asset isn’t the security

business.gov.au makes the point plainly when it compares leasing and buying: with leased equipment, you “can’t sell the equipment to recover money” (leasing or buying vehicles and equipment). If your paperwork says lease, rental or hire, the conversation is with the financier, not a buyer.

Under a chattel mortgage, ownership is already yours. The lender has a registered security interest over the asset until the debt is cleared, and that’s the thing you need to deal with.

Why will a buyer insist on a clear PPSR?

Because any serious buyer will search the register before they pay. The PPSR’s own case study on buying second-hand machinery follows a buyer who finds a registration on a lathe and walks away until it’s removed, because buying it would risk the machine being repossessed by the seller’s lender later.

The register explains that a search costs $2 online and that the certificate is proof of whether a security interest was registered at that time (PPSR and high-value goods). Some types of property can be searched by serial number; otherwise the search is against the seller’s details.

So a registration doesn’t stop a sale, but it changes the buyer’s question from “how much?” to “how do I know your lender gets paid?” The answer is a settlement where the lender is paid first.

How do you run the sale step by step?

1. Get an itemised payout figure as at the expected settlement date. Our guide to paying out a chattel mortgage early explains what’s in it and why it can be more than your statement balance.
2. Agree the price and a settlement date with the buyer, in writing.
3. Tell your lender a sale is happening. Ask how they want to receive funds and how quickly they’ll remove the registration once paid.
4. Settle through the lender. The buyer (or the buyer’s financier) pays the payout amount directly to your lender, and any balance to you. If the buyer pays you in full instead, pay the lender the same day and keep the proof.
5. Hand over the asset and paperwork only when funds have cleared: keys, service records, manuals, and the lender’s confirmation of payout.
6. Check the PPSR a week or two later to make sure the registration has been ended.

Dealers and auction houses usually handle steps 3 and 4 for you. Private sales need you to drive them.

What if the sale price is less than what you owe?

This is the uncomfortable one, and it’s more common than people admit. A machine bought with a large balloon, or one that’s lost value faster than expected, can be worth less than the payout figure. That gap is called a shortfall or negative equity.

The lender won’t release its security for less than the full payout, so you have three choices:

• Fund the gap from cash at settlement.
• Fund the gap with another facility. For a trading business, unsecured or cash-flow options sized on turnover and bank statements typically run from $5k to $500k. Where property is available, property-secured loans run from $20k to $5m.
• Hold off. Keep using or hiring out the asset until enough of the loan is repaid that a sale covers it.

If you’re trying to work out which of those is realistic, tell us what you’re selling and what you owe. There’s no credit check when you first enquire.

Should you sell privately, to a dealer or at auction?

Each route handles the finance a little differently.

• Private sale. Usually the best price, but you run the payout, the PPSR and the paperwork yourself, and the buyer may need time to arrange their own finance.
• Dealer trade or outright sale. Dealers deal with lenders every day and can pay out your contract directly. The price is often lower than a private sale, but it’s fast and tidy, which matters when you’re replacing the asset.
• Auction. Good for equipment with an active auction market. Tell the auction house about the finance up front; most will settle with your lender from the proceeds. Remember the hammer price isn’t guaranteed, so know your payout figure before you set a reserve.

Whichever route you choose, the rule is the same: the lender gets paid in full before the buyer drives or tows the asset away.

What tax questions should you ask before selling?

Two are worth raising with your accountant before you sign anything.

GST. If your business is registered for GST, selling a business asset is generally a taxable sale, so the price you agree should be clear about whether it includes GST.

Income tax. Selling a depreciating asset is a balancing adjustment event. The ATO explains that the sale proceeds (the termination value) are compared with the asset’s written-down value (the adjustable value). If you sell for more than the written-down value, the difference is generally assessable income; if you sell for less, it’s generally deductible (disposing or ceasing to use a depreciating asset). Assets you wrote off instantly or put in a small business pool are handled under their own rules, so ask how yours is recorded.

Neither question should stop a sale, but both affect how much of the money is really yours.

An illustrative example

Illustrative only. A small earthmoving business owns two excavators, both under chattel mortgages. A council contract has ended, and one of the machines has barely moved in four months.

The owner gets a payout figure of about $62k on the idle machine. A buyer from another region offers $70k after running a PPSR search and seeing the registration. The two parties agree that the buyer’s financier will pay $62k straight to the seller’s lender and $8k to the seller on the settlement date. The lender confirms payout the same afternoon and ends its registration a few days later.

The owner’s monthly commitments drop by one repayment, the remaining machine keeps working, and the business has cash for the next tender’s mobilisation costs. The yellow goods finance page explains how earthmoving gear is usually financed if the next contract needs a different machine.

Selling one asset to make room for the next? Start here

Selling financed equipment is often the first move in something bigger: a different machine, a new contract, or a leaner fleet. If a shortfall or a replacement purchase is part of the picture, it pays to know your options before the buyer is waiting.

The enquiry takes about a minute and there’s no credit check when you first enquire. We won’t send your details to a pile of lenders, so your phone stays quiet. A real person looks at what you’re selling, what you owe and what comes next, then calls you to talk it through. Please fill the form in accurately, including the payout figure if you have it, so we can line up the right option the first time.

See what your business could qualify for →