If a business needs a new ute, a coffee machine, a commercial oven or a CNC router, asset finance is usually the first thing an accountant suggests. It’s a sensible default: the thing being bought secures the loan, so lenders can lend with confidence, and the business keeps its working capital free for everything else.
What is asset finance?
business.govt.nz describes asset finance as a loan to pay for a particular asset, such as a delivery van. The lender takes security over that asset and registers it on the Personal Property Securities Register (PPSR), the Companies Office’s online register of security interests over personal property. You repay over an agreed period that usually tracks the asset’s working life.
The main structures
| Structure | Who owns it during the term | At the end | Typical use |
|---|---|---|---|
| Chattel loan / secured loan | You (lender holds security) | Security discharged | Vehicles, equipment |
| Hire purchase | Lender, until final payment | Ownership passes to you | Vehicles, plant |
| Finance lease | Lender | Return, renew or buy | Equipment, tech |
| Operating lease / rental | Lender | Return | Fast-depreciating or tech items |
Your accountant should advise which suits your tax and GST position, because the structure affects depreciation claims and when GST can be claimed.
Why lenders like it
The asset has a resale value, and the PPSR registration gives the lender priority over it. That lowers risk, which is why asset finance can be quicker and more straightforward than other lending, particularly for new or near-new assets from dealers.
When asset finance works best
- New or near-new assets with an active resale market.
- Dealer purchases with a clear invoice.
- Assets that will earn their keep over the finance period.
- Businesses that want to keep cash and other borrowing capacity free.
When it’s awkward
- Older assets past a lender’s age limit.
- Specialised equipment with a thin resale market.
- Private sales and auctions.
- Bundled purchases: a whole workshop, or equipment as part of buying a business.
- Soft costs: freight, installation, fit-out, training.
In those cases, see alternatives to asset finance.
The PPSR: two checks every buyer should make
- Before buying used equipment or a vehicle, search the PPSR. If a previous owner’s lender has a registered interest, you could inherit a problem. A search is quick and inexpensive.
- After paying off a loan, check the registration is removed. Lenders should discharge their financing statement; make sure they have, or you may struggle to sell the asset later.
How to compare asset finance offers
- Total cost over the term, including establishment and documentation fees.
- Balloon or residual payments: a lump sum at the end lowers regular repayments but must be planned for.
- Early payout terms: what it costs to settle early if you upgrade or sell.
- Insurance requirements: most lenders require comprehensive cover.
- Maintenance obligations, especially on leases.
Asset finance vs other options
| Asset finance | Unsecured loan | Property-secured loan | |
|---|---|---|---|
| Security | The asset | None over property | Property |
| Buys | That asset only | Anything for the business | Anything for the business |
| Best for | New, resaleable assets | Moderate or used purchases | Large, bundled or specialist purchases |
| Watch for | Age limits, balloons | Sized on turnover | Property at risk; plan exit |
Asset finance by industry: a few New Zealand patterns
- Trades and construction. Utes, vans, excavators and trailers are the classic asset-finance purchases. Near-new vehicles from dealers are straightforward; older plant bought at auction is where applications stall.
- Hospitality. Espresso machines, commercial ovens and refrigeration are commonly financed, but fit-out (joinery, plumbing, electrical work) usually isn’t, because it can’t be repossessed and resold.
- Agriculture and horticulture. Tractors, sprayers and harvest equipment are financed seasonally. Specialist vineyard or orchard machinery can have a thinner resale market, so terms may be tighter.
- Manufacturing and engineering. CNC machines, lathes and presses are financeable, but bespoke or imported second-hand machinery may need extra valuation work.
- Transport and logistics. Trucks and trailers are often financed through specialist lenders familiar with the sector.
Common mistakes to avoid
- Financing the asset but not the cost of getting it working. Freight, installation and commissioning can be significant. Budget for them separately.
- Ignoring the balloon. A large final payment keeps repayments low, but it arrives whether or not the asset has paid for itself.
- Stretching the term past the asset’s useful life. If you’re still paying for a machine after it’s been replaced, you’re carrying two debts for one job.
- Forgetting insurance. Lenders will require cover, and an uninsured loss still leaves the loan to repay.
Where we fit
We don’t arrange standard asset finance; for a new vehicle from a dealer, it’s often the best option. Where it doesn’t fit, we arrange property-secured business loans from $20,000 to $1m and unsecured loans and lines of credit for businesses usually trading 6+ months. Those can fund older, specialised or bundled purchases, and the soft costs asset finance won’t cover.