Asset Finance - your questions answered
How asset finance works
As asset finance becomes more prominent in Australia, it’s important to understand how it works and if it suits you.
What is asset finance?
One of the most popular options for a car is personal asset finance. Consumer car loan use you car as security for your loan and, as a result, offers you a competitive rate when compared to standard personal loans.
Self employed, small business and property owners can take advantage of even lower rates through secured vehicle finance.
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.
Consumer Car Loan
This is the car loan for the everyday vehicle user. Use your vehicle as security with fixed payments over a 1 to 7 year loan term. Available for both new and used cars purchased through a dealership or privately.
Provide you ABN to receive a Chattel Mortgage and take advantage of lower vehicle finance rates. This lowers the cost to your business as well as, potentially, providing a handy tax deduction – talk to your accountant for more details here.
Here, the financier owns the asset however they bear the risk of disposal of the asset at the end of lease.
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 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.
Also, keep in mind that you might have more bargaining power if you went to a car dealership with a pre-approved car loan as opposed to seeking out the dealer’s financing options straight away.