Find out what asset finance rates are available to you

Asset finance is a form of funding or leasing agreement that allows companies to hire physical assets, such as vehicles, equipment, and machinery, without having to pay the full cost of the asset upfront. You can also potentially reduce tax liabilities. Instead of buying the asset outright, you’ll typically make regular monthly payments, which can help you preserve your working capital and maintain a healthy cash flow. Other uses for asset finance include unlocking capital from assets you already own by selling them to lenders and then leasing them back.

Asset finance agreements are typically secured against the asset itself. This reduces the risk to the lender, allowing for more favourable borrowing terms for the business and a more streamlined approval process. The trade-off, as with all secured finance, is that the lender could repossess and sell the asset if you do not keep up with the repayments.

There are many different types of asset finance, as we’ll discuss in the next FAQ. The main uses of asset finance across the most popular types are:

• To hire physical assets with the goal of owning them outright by the end of the agreement.

• To lease physical assets throughout most of their useful life without ever owning them, but bearing the risk of depreciation (or benefiting from appreciation).

• To lease physical assets for a part of their useful life without ever owning them, and not bearing any risk of their depreciation (or not benefiting from appreciation).

• To release capital from assets you already own, whilst continuing to use them as normal by paying a monthly rental fee.

Lenders offer different forms of asset finance to suit different use cases or business goals. For example, Hire Purchase deals allow you to eventually own the asset but also require greater upfront costs, such as a deposit and VAT. However, with Finance Lease deals, you don’t automatically own the asset at the end of the term, but you also don’t have to pay a large deposit and you can claim back the VAT. So both products allow you to lease an asset from the lender, but which is right for you depends on your ownership goals and cash flow and tax priorities.

The most common types of asset finance are:

• Hire Purchase – The lender purchases the asset, and you hire it from them with the goal of owning the asset at the end of the term. You’ll pay a deposit, VAT, and monthly instalments. Ownership of the asset will transfer to your business once the repayments have been completed.

• Finance Lease – The lender purchases the asset, and you hire it from them with the goal of benefiting from the asset throughout its useful life. You’ll typically pay off the full value of the asset and interest over the term, but upfront costs are low, and you can reclaim the VAT. You won’t automatically own the asset at the end of the term, but you may be able to continue to rent it, sell it on the lender’s behalf, or return it (and you may receive a rebate).

• Operating Lease – This is a short to medium-term rental agreement where the lender bears the full risk of the asset’s potential depreciation. You typically won’t rent the asset throughout its useful life, but instead return it to the lender after a specified period of time without the option to own it (you usually won’t receive a rebate). The upfront costs are minimal compared to other asset finance options.

• Asset Refinancing – Much like remortgaging a property to release equity, asset refinancing allows you to release capital that’s tied up in assets you already own. The lender buys the asset from you and then leases it back to you. This allows you to continue using the asset whilst also receiving an immediate cash injection that you can use for other business needs.

Interest rates on asset finance can vary widely depending on the type of deal, the type of asset, the current market conditions, and the creditworthiness of the business. Typically, you can expect rates ranging from 4% to 15%. Our specialist asset finance brokers can give you access to a wide range of deals from across the market so you can find a rate that works for you.  

The exact repayment structure will depend on the type of asset finance you choose. Typically, the interest is divided by the number of months on your term, and then you’ll pay off a portion of the interest and principal each month.

For Hire Purchase agreements, you’ll typically need between a 5% and 20% deposit. This will build your equity in the asset from the start and reduce the amount of interest you pay overall. For other types of asset finance, such as Finance Lease or Operating Lease agreements, you won’t need a deposit, but you’ll typically need to pay one to six months of the rent upfront. The more you pay upfront, the lower the monthly payments will be.