Typical equipment finance fees
These are the typical fees you may see when taking out an equipment finance loan.
| Fee | Who charges it and what it covers |
|---|---|
| Lender application fee | Charged by the lender you are borrowing from. |
| Origination fee | Charged by the broker or service provider, not the lender. |
| PPSR fee | Charged by the lender for registering its security interest in your equipment. |
| Inspection fee | May apply if the lender wants the equipment inspected before settlement. |
| Account keeping fee | A potential monthly fee charged by a small handful of lenders. |
In this article
Is a broker’s origination fee optional? Yes.
Brokers choose whether to charge an origination fee. Some charge nothing, some charge a couple of hundred dollars, and some charge $1,000 or more.
It is important to understand that brokers also earn brokerage from the lender on the amount you finance. An origination fee is an extra charge on top of that payment.
You can push back or request a waiver. It is an optional charge the broker decides to apply, and not every broker charges it. MFG does not charge a separate broker origination fee on its equipment finance transactions.
The lender fees
Lender application fees are generally non-negotiable. They are charged by the lender for setting up your finance, separately from the interest charged on the loan.
Nearly every bank charges an application fee. Expect around $500, give or take a couple of hundred dollars either side.
Trap for beginners: financing the fees
Watch for brokers or dealers adding the fees to the amount you are financing for the equipment, but not disclosing your new effective interest rate.
A $1,000 broker origination fee plus a $500 lender application fee means $1,500 in fees. If that $1,500 is added to your loan, you will pay interest on it as well.
On $100,000 over 60 months at 7.5%, with monthly repayments in arrears and no balloon, the repayment is $2,003.79 a month. Add $1,500 in financed fees and it becomes $2,033.85 - an extra $30.06 a month.
The quoted rate is still 7.5% on the larger $101,500 loan. But measured against the $100,000 equipment price, that repayment is equivalent to borrowing at about 8.13% a year without financed fees. That is why the headline rate alone does not tell you the full cost.
Our preferred outcome is simple:
- Only pay the lender application fee of a few hundred dollars, without an extra broker origination fee.
- Pay the fee upfront at settlement. Keep it out of the loan so you do not pay interest on it.
- Ask for repayments in arrears. Your first actual loan repayment is roughly 30 days after settlement, with the lender application fee paid at settlement.
Want to talk through the fees on your next equipment loan? Reach out to James and Dan anytime.