Quick answer
Asset finance is best for businesses buying vehicles, machinery or equipment with a resale market, because the item secures its own loan and the term can match its working life. It's less suited to very old, custom or hard-to-resell items, and it only pays for the asset itself. Check any balloon, who owns the item during the term and early payout costs.
Key points
- The asset being bought is the security, so property can stay out of it.
- Common forms include chattel mortgage, commercial hire purchase and finance leases.
- Terms can be matched to the item's useful life.
- Security interests are recorded on the Personal Property Securities Register.
- Security
- The vehicle or equipment
- Forms
- Chattel mortgage, hire purchase, leases
- Watch
- Balloons and ownership terms
Asset finance is the workhorse of business lending: utes, trucks, excavators, ovens, dental chairs and printing presses are bought this way every day. Done well, it lets a business buy what it needs without touching property or draining cash. Done badly, it leaves a balloon nobody planned for.
What counts as asset finance?
Any finance where the asset being bought is the main security. Business.gov.au lists hire purchase, chattel mortgages and leasing among the common funding options for acquiring assets. In practice:
- Chattel mortgage. The business owns the asset; the lender holds a mortgage over it until the loan is repaid.
- Commercial hire purchase. The lender owns the asset until the final payment, then ownership passes to you.
- Finance lease. The lender owns the asset and leases it to you, often with a residual value at the end.
- Operating lease or rental. You use the asset; the lender keeps ownership and the risk of its resale value.
Business.gov.au’s leasing or buying guide summarises the trade-off: leasing for lower upfront costs and easier upgrades, buying for ownership and potential long-term savings.
Our scorecard
| Test | How asset finance scores |
|---|---|
| Security | The asset itself; property not required |
| Flexibility | Moderate; selling early means paying out the loan |
| Paperwork | Supplier invoice or quote, ID, statements |
| Total cost | Often competitive relative to the amount; balloons push cost to the end |
| Fit to the job | Excellent when the term matches the asset’s life |
Our verdict
Our verdict on asset finance
- Best for
- Vehicles and equipment with a resale market, bought by a trading business that will use them for most of their working life.
- Not for
- Very old, custom-built or obscure items, installation-heavy projects, or anything likely to be obsolete before the loan ends.
- Check before you sign
- The balloon or residual, who owns the asset during the term, insurance requirements, early payout terms and the tax treatment.
Asset finance wins because it matches debt to the thing that earns the money. The lender’s comfort comes from the asset, so property stays out of it and the term can be longer than unsecured lending allows. Security interests are registered on the Personal Property Securities Register, which also lets buyers of second-hand gear check it’s free of existing finance.
It loses when the asset is hard to value or resell, or when much of the cost is installation and fit-out. Then a general business loan, possibly secured against property, does the job better.
If you’re unsure, the Loan Finder will rank asset finance against other structures for your situation, or you can ask a specialist about the asset you’re buying.
Illustrative example: a farm contractor’s new tractor
Illustrative only. An agricultural contractor needs a larger tractor for a new seeding contract. It’s new, from a major brand, and will be used for many seasons.
A chattel mortgage over a term close to its expected working life keeps repayments in line with the contract income. The contractor considers a balloon to lower repayments, then decides against it because the tractor will be kept, not traded.
Verdict for this owner: chattel mortgage, no balloon.
Watch-outs
- The balloon. It lowers repayments, but you’ll need the lump sum, a refinance or a sale at the end.
- Term longer than life. Don’t still be paying for something you’ve replaced.
- Insurance. Lenders usually require comprehensive cover for the term.
- Used gear. Search the PPSR before you buy privately.
- Tax. Structures differ in how GST and depreciation apply. Ask your accountant.
For the goal-based view, read the best way to fund equipment and the best way to finance a fleet. If you don’t own property, asset finance is often a strong option; see the best loan when you have no property.
Which asset finance form suits which business?
| Form | Who owns it during the term | Tends to suit |
|---|---|---|
| Chattel mortgage | You, with the lender’s security registered | Businesses that want ownership and plan to keep the asset |
| Commercial hire purchase | Lender, until the final payment | Businesses happy to own at the end |
| Finance lease | Lender, with a residual at the end | Businesses that may upgrade or return the asset |
| Operating lease or rental | Lender, throughout | Businesses that upgrade often and want maintenance bundled |
The right form depends on how long you’ll keep the asset, whether you want to own it, and how your accountant wants it treated for tax. It’s worth a short conversation with your accountant before you choose.
What makes an asset easy or hard to finance?
Easier: new or near-new items from established makers, vehicles with strong resale markets, equipment bought from a recognised dealer.
Harder: very old items, one-off custom builds, equipment that’s expensive to remove or move, imports with little local resale market, and private sales with unclear ownership. For the harder cases, a general business loan or property-secured funding is often the better route.
Is asset finance available without property?
Yes. That’s one of its main strengths: the asset is the security, so owners who rent can still buy vehicles and equipment.
Buying something that earns its keep?
Tell us what you’re buying and who from. A specialist will look at the asset, your trading and your timing, and tell you which form of asset finance fits.
We don’t check your credit just because you’ve asked, and your request goes to one person, not a pool of lenders. Exact details of the make, model, age and price make the answer quicker and more accurate.
Frequently asked questions
What's the difference between a chattel mortgage and a lease?
With a chattel mortgage, the business generally owns the asset from the start and the lender holds a mortgage over it. With a lease, the lender owns the asset and the business pays to use it, sometimes with an option to buy at the end.
What can asset finance be used for?
Vehicles, trucks, trailers, earthmoving and agricultural machinery, manufacturing equipment, medical and dental equipment, IT and more, generally items with a resale value.
How do I check used equipment isn't already financed?
Search the Personal Property Securities Register. The PPSR site explains a low-cost search can show whether goods are likely to be free from debt.
Can I include GST in asset finance?
The treatment of GST depends on the structure and your registration. Ask your accountant, and check how the lender handles GST on the purchase.