Asset Finance Through a Broker: Equipment, Vehicles and Business Assets
Key Takeaways
• Asset finance helps a business acquire equipment, vehicles, or other assets without paying the full cost up front.
• The asset itself usually serves as security, which can make the financing easier to obtain than an unsecured loan.
• Common structures include a chattel mortgage and a lease, each with different ownership and tax implications.
• A broker can compare lenders and structures to match the finance to your needs and your accountant's advice.
Most businesses need equipment or vehicles to operate, but few want to tie up a large chunk of cash buying them outright. Asset finance solves that: it lets you acquire the vehicles, machinery, or equipment your business needs and pay for them over time, usually with the asset itself serving as security. It is a different tool from a business loan for operating capital; here, the finance is tied to a specific asset.
This guide explains what asset finance is, the main ways it can be structured, the benefits and the tax basics, and how a broker helps you find the right fit. As tax and structure are involved, it is general information rather than advice, and best confirmed with your accountant.
The right asset finance depends on what you are buying, how your business is set up, and your tax position, so it is worth getting it right. If you would like to explore your asset finance options, we are happy to talk them through, with no cost and no pressure.
What Asset Finance Is
At its core, asset finance is about acquiring something specific and paying for it over time.
Asset finance is funding used to buy a particular business asset, a vehicle, a machine, equipment, or technology, where that asset usually serves as the security for the loan. Because the lender can rely on the asset itself, this kind of finance is often easier to arrange, and sometimes cheaper, than borrowing without security. It lets a business get what it needs to operate or grow without paying the full price upfront, keeping cash free for everyday running costs. It is distinct from a business loan for working capital, which funds operations rather than a specific asset.
What It Can Cover
Asset finance applies to a wide range of things a business uses to operate. It is commonly used for assets such as:
• Vehicles, from cars and utes to vans and trucks.
• Machinery and plant, such as excavators or manufacturing equipment.
• Trade and industry equipment, including medical, dental, or hospitality fit-outs.
• Technology, such as computers, point-of-sale systems, and other hardware.
As a rule, lenders prefer assets with clear value and a reasonable working life, since the asset is their security. Both new and used assets can usually be financed.
The Main Ways It Is Structured
Asset finance is not a single product but several, and the differences mostly come down to who owns the asset and how it is treated for tax purposes.
A Chattel Mortgage
With a chattel mortgage, you own the asset from the start, and the lender takes a mortgage over it as security until the loan is repaid. It is the most common choice for businesses, partly because owning the asset can suit their tax position. Repayments are made over an agreed term, commonly one to seven years, often with a balloon at the end.
A Lease
With a lease, the lender owns the asset and leases it to you for a set term, while you use it and make regular payments. Depending on the type of lease, you may have the option to buy the asset at the end, pay a residual, return it, or upgrade. Leases can suit assets you want to refresh regularly, such as vehicles or technology.
Other Arrangements
There are variations on these, including hire purchase, where the lender owns the asset until your final payment, and ownership then passes to you, and, for vehicles arranged through salary packaging, a novated lease. The best structure depends on how you want to own and account for the asset, which is a conversation to have with your accountant.
Understanding the Balloon Payment
One feature that often appears in asset finance, especially for vehicles, is worth understanding on its own.
A balloon, sometimes called a residual, is a lump sum left owing at the end of the term, rather than spreading the full cost across the regular repayments. Setting a balloon lowers your monthly repayments, which can help cash flow, but it leaves a larger amount to deal with at the end. When the term finishes, you typically pay the balloon off, refinance it, or trade the asset in and start again. It is worth setting the balloon sensibly, though: if it ends up higher than the asset is worth at the end, you could be left short. It is a useful tool, but one to plan for rather than be surprised by.
The Benefits, and the Tax Basics
Asset finance is popular with businesses for several practical reasons, as well as for tax considerations.
The main appeal is preserving cash flow: you get the asset now and keep your cash for running the business, rather than sinking it into a one-off purchase. Because the asset is the security, the finance is often easier to obtain and competitively priced, and fixed repayments make budgeting simpler. On the tax side, the treatment depends on the structure and the extent to which you use the asset for business. Under a chattel mortgage, where you own the asset, you may be able to claim depreciation and the interest, and claim the goods and services tax (GST) on the purchase sooner; under a lease, you may instead claim the lease payments. Small businesses may also be able to deduct eligible assets immediately through the instant asset write-off, which generally applies only where you own the asset, though the threshold and eligibility can change. Because all of this depends on your structure and circumstances, it is general information only; your accountant or registered tax agent is the right person to confirm what applies and the current rules.
How a Broker Helps
This is where working with a broker can make a real difference, much as it does with home loans.
Asset finance is offered by a wide range of lenders, from the major banks to specialist asset financiers, each with different appetites, rates, and preferred asset types. A broker can compare across them, rather than leaving you to approach one lender at a time, and match the structure and term to what you are buying and how your business is set up. A broker can also handle the paperwork, help structure the balloon and term sensibly, and work in step with your accountant on the tax side. For a busy business owner, that saves time and often money.
A Real-World Example: Financing a Work Vehicle
Here is how asset finance can work in practice, with round figures. Treat it as a guide only.
Dean runs a small landscaping business and needs a new work ute that costs around $60,000. Rather than pay cash and drain his working capital, he uses a chattel mortgage: he owns the ute from day one, the financier holds security over it, and he repays it over five years. He sets aside a $12,000 balloon payment at the end, which lowers his monthly repayments and keeps cash free for materials and wages.
His accountant confirms the tax treatment, including depreciation, interest, and the GST, based on his business use of the vehicle. When the five years are up, Dean can pay off the $12,000 balloon, refinance it, or trade the ute in and finance a replacement. The finance let him get the vehicle he needed straight away, without the upfront hit to his cash flow.
Where to Read More
For an independent overview of the options, the Australian Government's business.gov.au has guidance on leasing or buying business equipment, including how to compare the two and the tax and GST points to weigh up.
Frequently Asked Questions (FAQs)
What is asset finance?
Asset finance is funding used to acquire a specific business asset, such as a vehicle, machine, or piece of equipment, where the asset itself usually serves as security for the loan. It lets a business get what it needs and pay for it over time, rather than buying outright, which keeps cash free for running costs. It differs from a business loan for working capital, which funds your operations rather than a particular asset.
What can I use asset finance for?
A wide range of business assets. It is commonly used for vehicles such as cars, utes, vans, and trucks; machinery and plant such as excavators and manufacturing equipment; trade and industry equipment, including medical, dental, or hospitality fit-outs; and technology such as computers and point-of-sale systems. Lenders generally prefer assets with a clear value and a reasonable working life, since the asset is their security, and both new and used assets can usually be financed.
What's the difference between a chattel mortgage and a lease?
Mainly, who owns the asset. With a chattel mortgage, you own the asset from the start, and the lender holds a security interest in it until the loan is repaid, which can suit a business's tax position. Under a lease, the lender owns the asset and leases it to you, with options at the end to buy it, pay a residual amount, return it, or upgrade. The right choice depends on how you want to own and account for the asset, which your accountant can advise on.
What is a balloon payment?
A balloon, also called a residual, is a lump sum left owing at the end of the finance term, rather than being spread across the regular repayments. Setting one lowers your monthly repayments, which helps cash flow, but leaves a larger amount to settle at the end. When the term finishes, you typically pay it off, refinance it, or trade the asset in. It is useful, but worth setting sensibly and planning for, so the final payment does not catch you out.
Are there tax benefits to asset finance?
Often, yes, though it depends on the structure and your business use. Under a chattel mortgage, you may be able to claim depreciation and interest, while under a lease, you may claim the lease payments, in each case for the business-use portion, and there may be GST to account for. Small businesses may also be able to use the instant asset write-off for eligible assets they own. Because these depend on your circumstances and the current rules, an accountant or registered tax agent should confirm what applies to you.
Why use a broker for asset finance?
Because asset finance is offered by many different lenders, the right structure matters. A broker can compare the major banks and specialist asset financiers rather than leaving you to approach them one by one, and match the structure, term, and balloon to your needs and your tax position. A broker also handles the paperwork and works alongside your accountant. For a busy business owner, that usually saves both time and money.
The Bottom Line
Asset finance is a practical way for a business to obtain the equipment, vehicles, and other assets it needs without paying the full cost upfront, with the asset itself typically serving as collateral. It comes in a few forms, mainly the chattel mortgage and the lease, which differ in who owns the asset and how it is treated for tax purposes. Used well, it preserves cash flow, keeps repayments predictable, and can carry tax benefits.
The right structure depends on what you are buying, how your business is set up, and your accountant's advice, so it is worth getting that combination right from the start. A broker can compare lenders and structures and handle the legwork, so you end up with finance that suits the asset and the business. If you would like help exploring your asset finance options, we would be glad to walk you through them.