Asset Finance

What Is Asset Finance?

Asset finance is a way of funding the purchase or use of a physical asset — such as a vehicle, equipment, or machinery — without paying the full cost upfront. Instead of drawing on working capital or savings, the asset itself is often used as security against the finance, which can make it more accessible than unsecured lending.

It is commonly used by businesses to acquire the tools and equipment they need to operate, but it is also available to individuals looking to finance a vehicle or other high-value asset.

Who Uses Asset Finance?

Asset finance is used across a wide range of industries and situations. Common examples include:

• Business owners purchasing vehicles, plant, or equipment
• Tradespeople funding tools or work vehicles
• Farmers acquiring machinery or agricultural equipment
• Medical and allied health professionals financing specialist equipment
• Individuals purchasing a car through a chattel mortgage or consumer car loan

Whether you are a sole trader, a small business, or an individual, there are asset finance structures that may suit your situation.

Common Types of Asset Finance

There are several ways to structure asset finance in Australia, and the right option depends on how you intend to use the asset, how you want to treat it for tax purposes, and whether you want to own it outright at the end of the agreement.

Chattel Mortgage
One of the most common structures for business use. The lender advances funds to purchase the asset, and a mortgage is registered over it as security. The borrower takes ownership of the asset immediately and may be able to claim depreciation and GST benefits depending on their circumstances. Always speak with your accountant about tax implications.

Finance Lease
The lender purchases the asset and leases it to you for an agreed term. You make regular lease payments and use the asset as if it were your own, but the lender retains ownership throughout. At the end of the term, you may have the option to purchase the asset, extend the lease, or return it.

Operating Lease
Similar to a finance lease but typically used for assets that may become obsolete or need regular upgrading — such as technology or fleet vehicles. Payments are generally lower because you are not financing the full value of the asset, and at the end of the term the asset is returned rather than purchased.

Commercial Hire Purchase
The lender purchases the asset on your behalf and you hire it from them over an agreed period. Ownership transfers to you once the final payment is made. This structure can suit businesses that want to own the asset at the end of the term while spreading the cost over time.

Consumer Car Loan
For individuals purchasing a vehicle for personal use, a consumer car loan works similarly to a chattel mortgage but is governed by consumer credit legislation. The vehicle acts as security and the borrower owns it from day one, with the lender holding a charge over it until the loan is repaid.

Fixed vs Variable Rate Asset Finance

Most asset finance products in Australia are offered at a fixed rate, which means your repayment amount stays the same for the life of the agreement. This makes it straightforward to budget and plan cash flow, which is particularly useful for businesses managing regular outgoings.

Variable rate options exist but are less common in asset finance. If rate flexibility or early repayment without penalty is important to you, it is worth discussing your options before committing to a structure.

What Do Lenders Look At?

Lenders assess asset finance applications based on a combination of factors. For business applicants this typically includes:

• The type and age of the asset being financed
• The financial position of the business and its trading history
• The applicant's credit profile
• The loan-to-value ratio — how much is being borrowed relative to the asset's value

For individuals, assessment is more closely aligned to personal lending criteria — income, expenses, credit history, and the value of the asset being purchased.

Lenders will also consider the asset itself. Newer assets with strong resale value are generally viewed more favourably than older or highly specialised equipment with a limited secondary market.

Loan Terms and Deposit Requirements

Asset finance terms in Australia typically range from one to seven years, depending on the type of asset and the structure used. Shorter terms mean higher repayments but less interest paid overall. Longer terms reduce the repayment amount but increase the total cost of the loan.

A deposit may or may not be required depending on the lender, the asset type, and your financial position. Some lenders will finance up to 100 percent of the asset's value, while others may require a contribution upfront to reduce their exposure.

Fees to Be Aware Of

As with most finance products, asset finance can involve fees that affect the overall cost of the agreement. These may include:

• Establishment or documentation fees charged when the loan or lease is set up
• Account keeping fees charged monthly or annually throughout the term
• Early termination fees if you pay out the agreement ahead of schedule
• End-of-term fees on lease products if you choose to purchase the asset at the end

Comparing the full cost of an agreement — not just the interest rate — gives a more accurate picture of what you will pay over the life of the finance.

How We Can Help

We work with a range of lenders who offer asset finance products across vehicles, equipment, and machinery. We can help you understand which structure suits your situation, compare rates and terms across lenders, and move through the application process with more clarity.

If you are unsure whether asset finance is the right approach, or you want to understand how different structures might affect your tax position, we can work alongside your accountant to make sure the finance decision fits the broader picture.

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