Understanding Your Asset Finance Options

• Having current equipment can help improve productivity, lower costs and allow you to compete more effectively
• If you operate in an industry where technology regularly updates it can help avoid being left behind
• It avoids using business capital, or personal resources to acquire the equipment – thus freeing up this capital for other more important purposes
• If the asset is used for business purposes, the lease payments or interest and depreciation, may be tax deductible depending on the financing product chosen
• A range of financing options are available (refer below) which provide flexibility
• Repayments can be aligned to cashflow

• Asset Finance is highly specialised – Asset ownership, tax and depreciation elements that need to be considered. As mistakes can be expensive to unwind, it is important to use an Asset Finance Specialist and not a generalist financier!
• Headline Interest Rates can be misleading. A low interest rate can mask a higher overall cost of finance over the term of the facility. An Equipment Finance Specialist can help understand the true cost of the finance and ensure you are comparing “apples with apples”
• Repayments not structured to your cashflow, or that do not allow sufficient time for installation and commissioning, can cause serious cashflow issues down the track
• The choice of financing products can be confusing and be difficult to understand.

• Chattel Mortgage
• Hire Purchase
• Operating Lease
• Novated Lease

• The asset is owned by the Lender and is “hired” by you
• Subject to satisfying qualifying criteria you may be able to claim the rental payments as a tax deduction
• Terms range from 12 months to 60 months
• Can include a Balloon (Residual)payment

Key elements of a Novated Lease include:

• The vehicle is owned by the Lender and leased to an employee for a fixed monthly fee
• Terms range from 12 to 60 months
• At the end of the Lease, the employee has the option of either handing the vehicle back to the Lender or purchasing it for a predetermined price
• It can be attractive to employees as the Lease payments are paid from pre-tax income (To work the employer needs to offer Salary Sacrificing)
• A Novated Lease is often used by businesses to retain key employees and/or to remove the Residual Risk associated with maintaining a fleet of company owned vehicles.

• The Asset is owned by the Lender
• The product is generally used for assets that quickly depreciate or where regular technology updates are needed (examples being phone systems, computers, software, medical equipment etc. It is also used by businesses that operate vehicle fleets or airlines)
• Terms generally range from 12 months to 60 months
• The is no Balloon (Residual) payment at the end of the Lease
• Subject to meeting qualifying criteria, the rentals may be tax deductible
• At the end of the Agreement, depending on the arrangement reached at the outset, you may have the choice to simply hand the asset(s) back to the Lender, or purchase it for a pre-determined price