Is it worth borrowing to buy money-saving

2 min read

Saving vs finance costCompare over its life

Funds itselfIf saving wins

Match term to lifeFinance to asset

Model conservativelyCautious savings

The efficiency case

Borrowing to buy equipment that lowers your running costs — energy-efficient plant, automation that cuts labour, machinery that reduces waste — is one of the soundest reasons to take on finance. If the ongoing saving comfortably exceeds the cost of the finance over the equipment's life, the investment funds itself and then some. See whether a loan pays for itself.

Running the numbers

Quantify the annual saving conservatively — assume it is a little less than the salesperson claims — and compare it to the annual finance cost. If the saving clearly beats the cost each year, and the equipment lasts well beyond the finance term, the case is strong. Watch for savings that depend on assumptions you can't control, like usage levels or energy prices, and discount for them.

Financing it well

Match the finance to the asset. Asset finance secured on the equipment is often the cheapest route — see asset finance vs loan — and a term matched to the equipment's useful life spreads the cost across the period it earns its saving. Avoid financing long-life, money-saving kit over a term far shorter than its life, which front-loads the cost before the savings accumulate.

Compare the finance cost against the saving on the true cost calculator, read the asset finance guide, and apply.

Frequently asked questions

How do I know if efficiency equipment will pay for itself?

Compare the ongoing annual saving — estimated conservatively — against the annual finance cost, over the equipment's useful life. If the saving clearly beats the cost each year and the kit lasts well beyond the finance term, it funds itself. Discount savings that depend on uncertain factors like usage or energy prices. If the case only works on optimistic savings, treat it as too risky.

What finance suits a money-saving equipment purchase?

Usually asset finance secured on the equipment, which is often the cheapest route because the security lowers the rate, over a term matched to the equipment's useful life. That spreads the cost across the period the kit earns its saving. Avoid a term much shorter than the asset's life, which front-loads the cost before the savings accumulate, straining cash flow early on.