Asset Finance - How It Works

October 05, 2016
Lisa Stromborg

There are a lot of very competitive rates for asset finance - many as low as some home loan rates.

Asset finance is becoming more prominent in Australia, so it's important to understand how it works and what it's for.

What is asset finance?  Asset finance is primarily tailored towards small business owners, contractors and the self-employed.  It enables you to purchase equipment you need to run your business.  For example, cars that are utilised for work can be financed and include add-ons such as signage or roof racks.

However, it is possible to get personal asset finance, the most popular of which is for buying a car.  We list some of the personal asset finance options available:

Commercial Hire Purchase
This finance allows you to hire and use the asset until the last payment is made, then title of the asset transfer to you.

Chattel Mortgage
This is where you own the asset from the outset and your loan agreement is secured by the asset.  You take ownership of the vehicle at the time of purchase, but the finance company also takes out a mortgage over the vehicle. Once the term of the loan is completed, you have title to the car.

Finance Lease
This is where the financier owns the asset, however, they bear the risk of disposal of the asset at the end of the lease.

Novated Lease
This option is best used in salary packaging.  The financier owns the asset, while you and your employer sign a novation agreement to share the responsibilities of the loan.

Asset finance is usually set over a period of one to seven years.

If you are considering asset finance, before you commit, we strongly recommend that you speak with your accountant and mortgage broker.

For home loan and finance advice, contact us on 0411 505 536, email: or click HERE to arrange a meeting.

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Posted in: Financial planning

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