What is asset finance?

Asset finance is a term that is often used by banks and leasing companies to describe a product offered to a customer under which the income derived by the bank or lessor (usually described as rent payable or principal and interest due) is used to finance the purchase price of an asset or the cost to the lessor or owner of the asset.

This guidance note defines terms such as asset finance (versus asset-based finance) and residual value. It summarises the following four types of asset finance products most commonly used in Australia:

• • operating leases;
• • finance leases;
• • hire-purchase agreements; and
• • chattel mortgages.

See What is asset finance?