What is Asset Finance and why should you use it?

A business man writing on paper

What is an asset

The definition of an asset is an object (such as a car) or a resource which can be converted into cash. They can be owned by the Government, companies or individuals and are used for these organisations to achieve their goals and generate income. Asset finance is acquiring assets for companies in a financially viable way.

What is Asset Finance?

Generally, asset finance is used when a company or individual needs to purchase a high-value object, such as a car or agricultural machinery.

Asset financing is ideal for companies who are in a position to grow, however, may not have the immediate funds to spend, or prefer to take a long-term payment out for their assets.

Depending on the financial agreement, the asset may become the property of the business over time.

How does asset financing work?

When a business needs to acquire a new asset, the finance company will fund the equipment, vehicle, machinery or plant and the client will pay a regular monthly fee to the finance provider.

A broker is used as an intermediary between the client and the funder to handle the transaction. A client can also use a broker to help them find the best deal for the asset they are looking to purchase. Find out more about why you should consider using a broker.

What are the different types of Asset Finance?

There are numerous different types of financing options available to choose from. They all have their advantages and disadvantages. They all follow the basic formula mentioned above.

Hire Purchase (HP)

  • Fixed Budgeting
  • Fixed Monthly Payment
  • No mileage restrictions
  • Full ownership at the end of the agreement

Lease Purchase

  • Lower payments through the option of a balloon (deferred final payment)
  • Option to purchase the vehicle at the end of the agreement
  • Flexible arrangement.
  • Any equity in the vehicle can be used as a contribution towards a new vehicle.

Personal Contract Purchase (PCP)

  • Fixed monthly payments
  • Low deposit
  • Fixed interest rates
  • Option to purchase at the end of the agreement
  • Option to hand the vehicle back at the end of the agreement with no additional charges* (subject to vehicle condition & mileage)
  • Available on new & used vehicles. (used must not exceed 60 months at the end of the term)

Find out how these types of asset financing work in more depth

Who should use Asset Financing?

Almost anyone is suitable for asset financing, including, individuals, small and medium-size business, as well as large companies and organisations because of the different finance options available.

It has become a more popular option in recent years, however, some financing providers tend to specialise in specific areas. This is another reason why going through a broker can help you secure the required finance.

Not sure if Asset Financing is right for you? Get in touch with Ethos today to find out.

We pride ourselves on building long-term relationships with our clients and lenders. As a result, we can get the best possible rates and advice when it comes to financing. As one of the UK’s leading independent asset finance companies, we’re confident we can acquire funding for any situation. Have a look at some of the sectors we specialise in.