Asset finance
Asset finance explained
Rook Bristol Editorial · Updated · 5 min read
The short answer
Asset finance spreads the cost of business equipment or vehicles over their working life, with the asset itself as security. With hire purchase you own the asset at the end; with leasing you use it for a fixed period and hand it back or upgrade. Because the finance is secured on the asset, it can be easier to obtain than unsecured borrowing, subject to status.
How does asset finance work?
- You get a quote from a dealer, manufacturer or approved seller.
- We check the asset and agree an amount and term.
- We pay the supplier and the asset is delivered to you.
- You make fixed repayments, usually monthly, over the agreed term.
Hire purchase, leasing or cash: which is right?
| Option | Do you own it? | Cash impact | Best when |
|---|---|---|---|
| Hire purchase | Yes, after the final payment | Deposit, then fixed repayments | The asset lasts years and earns steadily |
| Finance or operating lease | No | Lower monthly cost | Technology or vehicles you'll replace in a few years |
| Cash | Yes | Large upfront outlay | You have more cash than you'll need for a year |
For most revenue-producing equipment, spreading the cost wins: the asset starts earning immediately while the cost is matched to the years it earns. Talk to your accountant about capital allowances and VAT treatment, which differ between hire purchase and leasing.
What assets can be financed?
Most business-critical assets: manufacturing machinery, construction plant, commercial vehicles, catering equipment, medical and dental equipment, and technology. See asset finance for details, or manufacturing and distribution and construction for sector examples.