Leasing your car or equipment (equipment finance)

The lending landscape has changed considerably over the past decade. Instead of having to go cap in hand from bank to mortgage broker and being pushed into products that they choose, you can now compare loans from scores of lenders on sites like FatCat, and decide yourself which one suits you. However residential mortgages are only one part of the product offering available - you can also compare car loans, personal loans, term deposits and savings accounts. And as competition tightens between the ever-growing number of brokers and banks in the market, you the consumer have the power.

What is equipment finance?

Equipment finance is raising capital using a business asset as collateral. Put simply, instead of buying the item outright – such as vehicles, machinery or IT equipment - you use it as collateral and pay it off in instalments. This allows business owners to leverage their finances in a tax-effective manner, as well as managing their cashflow and capital more efficiently. Sound confusing? Well just think of it from your own perspective – if you pay off an item in instalments instead of buying it outright, you’ll have more money to spend on growing your business. The annual capital expenditure for businesses can be enormous and the number one problem for SMEs is a lack of capital; so if you can free up some much-needed capital by using equipment finance instead of purchasing the item outright - then you may well be able to take your business to the next level.

For those of you who think you know very little about equipment finance, think again. If you’ve ever taken out a car lease, then you will have a grasp of the basics of equipment finance. But equipment finance extends far beyond car leases and may include items as diverse as boats, x-ray machines and artwork. As long as the item purchased is for your business – regardless of what it is - you should be able to fund it.

The equipment finance market

Australian Bureau of Statistics data separates equipment finance into $500 million of “lease finance” and a portion as “commercial hire purchase”, the latter forming part of the massive $27,800 million commercial finance market. Whichever way you look at it the equipment finance market is huge, both in terms of the breadth of products and the lenders to choose from.

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