Asset Finance

Asset Finance is a type of funding that helps businesses acquire essential equipment, vehicles, or machinery without paying the full cost upfront. Instead, businesses can spread payments over time, preserving cash flow while gaining immediate access to necessary assets. Common types of asset finance include leasing, hire purchase, and refinancing, making it a flexible and cost-effective solution for growth and investment.

Hire Purchase

Hire Purchase is a type of asset finance that allows businesses to acquire essential equipment, vehicles, or machinery by spreading the cost over fixed monthly payments. Ownership is transferred to the business once the final payment is made.

Key Features

• Spread the cost of acquiring an asset over a period of 2 to 7 years, starting with an initial deposit, which can be as low as 5% of the asset’s value, plus full VAT upfront.
• Fixed repayments throughout the entire finance term, ensuring stability.
• Flexible repayment schedules, including monthly, quarterly, annual, or seasonal options, tailored to customer needs.
• Ownership of the asset is transferred to the customer after the final payment, which includes a small option-to-purchase fee.

Key Benefits

• Low upfront deposits help protect cash flow and preserve working capital.
• Transparent costs from the start, making budgeting and financial planning easier.
• Flexible terms – tailored repayment plans to suit business needs.

Finance Lease

With a finance lease, the finance company retains ownership of the asset for the entire lease term, which typically aligns with the asset’s full economic lifespan. At the end of the agreement, there is often an option to extend the lease at a significantly reduced rate, sometimes referred to as a ‘peppercorn’ rental.

Since you do not own the asset, it cannot be sold during the lease period.

The finance provider may claim writing-down allowances and pass on these savings through lower rental payments, making it a cost-effective option for businesses.

Operator Lease

An operating lease typically lasts for a period shorter than the asset’s full economic life, meaning the lessee is not responsible for financing the asset’s total value.

The lessor assumes the risk of the asset’s residual value at the end of the lease term.

This lease type is commonly used for assets with anticipated resale value, such as transportation vehicles. The lessee benefits from using the asset, sometimes alongside additional services. Operating leases are especially beneficial for companies that regularly update or replace equipment, as they can access assets without the burden of ownership.

In motor finance, contract hire is the most common form of operating lease, especially for managing vehicle fleets.