Here’s what you need to know to navigate the asset finance landscape in Australia.
What is Asset Finance?
Asset finance allows individuals or businesses to purchase assets, such as vehicles or machinery, by borrowing against the value of the asset instead of paying upfront. The most common types of asset finance in Australia are:
- Chattel Mortgage: You own the asset while the lender holds a mortgage over it. Once the loan is repaid, the mortgage is removed.
- Finance Lease: The lender buys the asset and leases it to you. You can buy, return, or extend the lease at the end of the term.
- Hire Purchase: Similar to a lease, but you own the asset once all payments are made.
- Novated Lease: Common for employee vehicle finance, where your employer makes payments on your behalf, deducted from your pre-tax salary.
Each option has benefits and tax implications, so choose based on your specific needs. We recommend seeking advice from a tax or accounting professional.
How Does Asset Finance Work?
Asset finance lets you spread the cost of an asset over time. Here’s a simplified process:
- Identify your asset needs and estimate costs.
- Choose a suitable finance option.
- Apply for finance with a lender or broker.
- Upon approval, the lender funds the asset purchase.
- Make regular payments over the agreed term, with the possibility of a final balloon payment.
Who Benefits from Asset Finance?
- Small Businesses: Asset finance helps businesses acquire equipment and vehicles without the need to make a large cash outlay.
- Individuals: Finance large purchases like cars or caravans with manageable payments.
- Farmers and Tradespeople: Fund expensive machinery and tools essential for your work.
- Employers: Use novated leases as a salary packaging benefit for employees.
Advantages of Asset Finance
- Preserving Cash Flow: Spread the cost of assets over time without depleting savings for the purchase costs upfront.
- Tax Benefits: Options like chattel mortgages may offer tax advantages, such as GST credits or interest deductions.
- Flexibility: Tailor repayment terms and structures to suit your needs.
- Access to Assets: Acquire essential tools, vehicles, and equipment without the upfront expense.
What to Consider Before Applying
- Interest Rates: Shop around for competitive rates.
- Loan Term: Longer terms mean lower payments but higher interest over time.
- Fees: Be aware of any upfront or ongoing costs.
- Tax Implications: Some finance options offer tax benefits—consult a tax practitioner or accountant for guidance.
Conclusion
Asset finance is a valuable option for acquiring essential assets while maintaining financial flexibility. Understanding the various types of finance available and considering your own financial situation can help you make the right choice.
If you need support with your asset finance journey, Credit Concierge is here to guide you every step of the way.
