Asset finance explained
How asset finance works
As asset finance becomes more prominent in Australia, it’s important to understand how it works and what type of customer it suits.
What is asset finance?
Asset finance is primarily tailored towards self-employed clients, small business owners, and contractors. It enables customers to purchase the equipment they need to run their business. Cars that are utilised for work such as utes for tradesmen can be financed and can include add-ons such as signage and roof racks. Even some business insurances can be included.
In saying that, it’s still possible to get personal asset finance, and one of the most popular options is for buying cars. Let’s take a look at some of the most common asset finance options.
Commercial Hire Purchase
With this type of finance, a client will hire and use the asset until the last payment. When they make the final instalment, title of the asset transfers to the customer.
This is where a customer own the asset from the outset and their loan agreement is secured by the asset.
Here, the financier owns the asset however they bear the risk of disposal of the asset at the end of lease.
This option is for customers who want to include the asset in their salary package. The financier owns the asset, while the customer and their employer sign a novation agreement to share the responsibilities of the loan.
How long is an asset finance term?
Asset finance is usually set over a period of one year through to seven years. There are a lot of very competitive rates for asset finance - some as low as some home loan rates.
As with all financial decisions, if our customers are searching for more information on asset finance, it’s important to arm them with the right knowledge so that they can the most informed decision possible.