Types of asset finance: what to compare
Understand the differences between borrowing to buy an asset, leasing and hire purchase, and the questions to ask before signing.
What is asset finance?
Asset finance is a broad term for arrangements used to acquire or use a particular asset, such as a vehicle, truck or machine. The agreement determines who owns it, what you pay and what happens at the end.
A loan to buy an asset
A loan may let you buy the asset while repaying the provider over an agreed term. Ask what security is taken, which fees apply, whether early repayment costs apply and whether there is a final balloon.
Leasing
A lease generally gives you use of an asset for an agreed period in exchange for payments. Ownership and end-of-term choices depend on the contract. Do not assume you will own it when the term ends.
Hire purchase
A hire purchase agreement provides use of an asset while payments are made, with ownership arrangements set out in the agreement. Check when ownership passes and all payments required.
How to compare the options
Compare upfront costs, regular payments, fees, the final payment, ownership, maintenance obligations and early exit terms. Use the same purchase price and timeframe where possible. Ask an accountant about tax and accounting effects.
Which type is right for me?
That depends on your cash flow, how long you need the asset and the terms actually available. Start with the purpose and total cost, then ask a finance professional to explain the agreement. A product label alone is not enough.
Further reading
ASIC Moneysmart: car loans explains comparing rates, fees and loan features. Ask a suitably qualified adviser about your circumstances.
All finance guides · Business asset finance · Vehicle finance