Lease Rate in Australia 2025: What Businesses Need to Know

In the current economic climate, understanding the intricacies of lease rates is more important than ever for Australian businesses and individuals considering equipment or vehicle finance. The lease rate, a critical component of leasing arrangements, directly impacts your cash flow, tax outcomes, and long-term financial commitments. With 2025 bringing new trends and policy shifts, it’s time to unpack what’s driving lease rates and how you can make smarter leasing decisions this year.

What Exactly Is a Lease Rate?

The lease rate is the effective interest rate charged by a lender or lessor on a leased asset. Unlike a simple interest rate on a loan, the lease rate reflects the cost of borrowing the asset over the lease term, factoring in depreciation, the asset’s residual value, and the lender’s risk margin. It’s typically expressed as a percentage and can be either fixed or variable, depending on the agreement.

• For business equipment: Lease rates determine your monthly or quarterly payments, affecting operational budgets and after-tax profits.

• For vehicles: Lease rates influence the total cost of using company cars, utes, or vans, and the attractiveness of novated lease schemes for employees.

In 2025, with the RBA’s cash rate hovering around 4.35% after a series of hikes and pauses, lease rates offered by banks and non-bank financiers are reflecting both funding costs and heightened risk premiums. This means lease rates have generally increased compared to pre-2023 levels, with more scrutiny on borrower profiles and asset types.

Key Factors Driving Lease Rates in 2025

Several forces are shaping lease rates in Australia this year. Understanding these can help you negotiate better or time your finance decisions strategically:

• RBA Policy and Funding Costs: The Reserve Bank’s cash rate remains a primary driver. After sharp rises in 2023–24 to curb inflation, rates have stabilised but are still at multi-year highs. Lenders pass on higher funding costs to customers, pushing lease rates up.

• Asset Depreciation and Residual Values: The anticipated value of the asset at the end of the lease (the residual) is critical. For example, electric vehicles (EVs) are now attracting more favourable residuals as their second-hand market matures in Australia, leading to slightly better lease rates for certain EV models in 2025.

• Credit Risk Assessment: Lenders are more cautious, with tighter assessment of business cash flow, sector stability, and personal guarantees. Start-ups or businesses in volatile sectors may face higher lease rates or additional conditions.

• Policy and Tax Incentives: The Federal Government’s extension of the instant asset write-off for eligible businesses (now up to $20,000 per asset for 2025), and ongoing FBT exemptions for certain low-emission vehicles, have made leasing more attractive, especially for SMEs and fleet operators.

Getting the Best Lease Rate: Strategies for 2025

With rates higher than in recent years, a smart approach can still save you thousands over the life of a lease. Here’s what to consider in 2025:

• Compare Across Lenders: Don’t accept the first offer. Major banks, specialist asset financiers, and fintech lenders may quote different rates for the same asset and profile. Use online comparison tools or work with a broker for access to multiple options.

• Negotiate Residuals: A higher residual value can lower your monthly payments, but make sure it’s realistic—an inflated residual could leave you exposed at the end of the lease term.

• Leverage Asset Type: Green assets, such as EVs and energy-efficient equipment, may qualify for special “green” lease rates in 2025. Some lenders are offering up to 0.5% p.a. discounts for eligible assets as part of their sustainability mandates.

• Strengthen Your Application: A strong business case, healthy balance sheet, and clear use of the asset can help you access more competitive rates. Prepare recent financials and be ready to demonstrate how the asset will generate value.

Real-world example: In 2025, a mid-sized construction firm in Brisbane secured a 5.8% lease rate for new excavators by opting for a 36-month term, providing a 20% deposit, and leveraging the instant asset write-off. Their previous rate in 2023 was over 7% for a similar deal, showing the value of shopping around and aligning with lender priorities.

The Bottom Line on Lease Rates in 2025

Lease rates in Australia are dynamic—shaped by macroeconomic trends, asset types, and government policy. In 2025, expect rates to remain elevated but with pockets of opportunity, especially for businesses embracing clean technology or demonstrating strong fundamentals. By understanding how lease rates are set and what drives them, you’ll be better positioned to negotiate terms that support your cash flow and business growth.