Asset finance product types & who can use them
Asset finance encompasses a range of loan products which can be used to purchase almost any asset (other than property). Most commonly associated with financing the purchase of a new or used car, they can also be used to purchase recreational vehicles such as motorbikes, caravans, boats, & aircraft etc.
For business purposes, the assets which may be purchased are endless, but includes items such as heavy haulage prime movers, earthmoving equipment such as excavators & loaders, agricultural machinery, medical equipment such as MRI scanners, computer equipment, retail/ office equipment & fitouts etc.
Asset finance is available, in one form or another to both individuals and business clients.
Types of asset finance loan products
Chattel mortgage: Also known as an equipment loan, and what most people associate with the word 'lease'. The customer (usually a business) borrows money to purchase a specific asset. The borrower then owns the asset outright, but the lender uses the asset as security until the loan has been repaid in full.
Consumer (NCCP) Loan: This is essentially a chattel mortgage for consumers. The customer borrows money to purchase an asset, which they then own in their own personal name. The lender uses this asset as security against the loan until all loan repayments have been completed.
Hire purchase: The lender purchases the asset on behalf of the customer, & then rents it back to the customer. At the end of the term, once all payments have been made, ownership of the asset transfers to the customer.
Finance lease: The lender owns the asset and the business customer pays a hire fee for use on a weekly, fortnightly or monthly basis. Depending on the lender, the customer may be able to purchase the asset at the end of the term for a pre-determined amount, or they may also be able to renew the lease at the end of the term.
Operating lease: The lender owns the equipment and the business customer pays a hire fee for use. The business does not take ownership of the asset. The costs are deemed operational expenses & therefore tax deductible.
Novated lease: A Novated Lease involves a three-way agreement between an employer, an employee and a lender. Usually used for the purchase of passenger vehicles, the Novated arrangement involves the employee leasing the vehicle directly from the lender. The employer will then agree to deduct lease rentals from the employee’s salary during the term of employment and to pay the rentals directly to the lender. The employee has the use of the vehicle for personal purposes. Ownership of the vehicle remains with the lender during the lease period. If the employee leaves their employment, they have the option to purchase the vehicle from the lender.
If you are interested in purchasing an asset, and would like some more information about which loan product is right for you, then please contact us on (08) 8224 0044.
