Commercial finance · Equipment
Asset finance: spreading the cost of equipment and vehicles over their working life
Asset finance lets a business use machinery, vehicles or technology now and pay for them in instalments, with the asset itself supporting the agreement. Ocean Capital Exchange introduces businesses to third-party asset finance providers.
Definition
What asset finance is
Asset finance is funding secured on a specific business asset, where a provider buys or funds the asset and the business pays for its use, or its eventual ownership, through regular instalments over an agreed term.
Because the provider has the asset as security, assessment focuses on the asset's value and expected life as well as on the business.
The main forms are hire purchase, where ownership normally passes to you after the final payment, and leasing, where the provider normally retains ownership. Refinancing releases cash from assets a business already owns.
At a glance
- Funds
- Machinery, vehicles, plant, technology and other identifiable assets
- Main forms
- Hire purchase, finance and operating leases, refinancing
- Deposit
- May be required; set by the provider
- Balloon
- An optional larger final payment, where agreed
- Security
- The asset itself; guarantees may also be requested
- OCE's role
- Introducer to third-party providers; not a lender
Suitability
Which businesses it tends to suit
Asset finance suits businesses acquiring tangible assets that hold value and generate income over several years.
Usually a fit
- Businesses buying machinery, vehicles or equipment with a working life longer than the finance term.
- Firms that prefer predictable monthly costs to a large upfront purchase.
- Businesses with valuable owned equipment seeking to release cash through refinancing.
- Growing operators adding capacity, such as extra vehicles or production lines.
Usually not a fit
- Intangible spending such as marketing, salaries or software subscriptions with no resale value.
- Assets that become obsolete faster than the finance term.
- Very specialised assets with little resale market, which providers may be reluctant to fund.
- Businesses that need cash for general working capital rather than a specific asset.
Process
How an asset finance agreement works
The steps for hire purchase or a lease are broadly similar.
- 01
Choose the asset
You select the equipment and supplier and obtain a quote.
- 02
Provider assesses
The provider reviews the asset, its value and your business.
- 03
Deposit paid
If required, you pay a deposit; the provider funds the balance.
- 04
Asset delivered
The provider pays the supplier and you take delivery and use the asset.
- 05
Instalments
You pay the agreed instalments over the term.
- 06
End of term
Under hire purchase, ownership normally passes after any balloon and final fees. Under a lease, you return, extend or arrange disposal as the agreement allows.
Accounting and tax treatment differ between hire purchase and leasing. Take advice from your accountant; this page does not cover tax treatment.
Comparison
Hire purchase, leasing and refinance compared
The key differences are ownership and what happens at the end.
| Hire purchase | Lease | Refinance | |
|---|---|---|---|
| Ownership | Normally passes to you at the end | Normally stays with the provider | You sell or charge an asset you own |
| Purpose | Acquire and eventually own | Use without owning | Release cash from existing assets |
| End of term | Final payment, then ownership | Return, extend or dispose as agreed | Repaid by instalments |
| Deposit | Often required | Advance rentals may apply | Not applicable |
In practice
Typical uses
Assets commonly financed include:
- Vehicles and fleets
- Vans, HGVs and company vehicles.
- Plant and machinery
- Production, construction and agricultural equipment.
- Technology
- IT hardware, servers and specialist equipment.
- Refinancing
- Releasing cash tied up in equipment already owned.
- Asset priceAssumed figure
- £60,000
- DepositAssumed 20% of price
- £12,000
- Financed balance
- £48,000
- Monthly instalment at an assumed 8% a year, no balloonStandard amortising calculation, 48 payments
- £1,171.82
- Total instalmentsInterest element £8,247.37
- £56,247.37
- With a £10,000 balloon insteadTotal instalments plus balloon £57,729.17
- £994.36 a month
Hypothetical arithmetic only. The deposit, 8% rate and balloon are assumptions to show how the calculation works, not typical or offered terms. Fees are excluded. A balloon lowers monthly payments but increases the total paid.
Weighing it up
Benefits and material limitations
Asset finance aligns cost with use, but the commitment runs for the full term.
Benefits
- Preserves cash
- Avoids a large upfront outlay.
- Predictable payments
- Fixed instalments help budgeting where the rate is fixed.
- Asset-backed
- The asset supports the agreement, which may reduce reliance on other security.
Material limitations
- Repossession risk
- The provider can recover the asset if payments are missed.
- Total cost
- Interest and fees mean you pay more than the cash price.
- Balloon risk
- A balloon must be paid or refinanced at the end.
- Early settlement
- Ending early may carry settlement charges.
- Asset condition
- Leases can include return conditions and charges for excess wear.
- Guarantees
- Personal guarantees may be requested.
Due diligence
What providers assess
Each provider applies its own criteria. Areas commonly reviewed include:
- The asset
- Type, age, value, expected life and resale market.
- Supplier
- Whether the supplier is established and the quote is genuine.
- Affordability
- Whether trading cash flow covers instalments.
- Financial history
- Accounts and credit history of the business and directors.
- Existing commitments
- Other finance agreements and charges.
Information often requested
- Supplier quotation or asset details
- Recent accounts and management accounts
- Business bank statements
- Details of existing finance agreements
Indicative only. Providers set their own requirements. Ocean Capital Exchange does not make lending decisions.
Pricing structure
Costs and repayment
Pricing is quote-specific. Cost components to look for:
- Interest or finance charge
- Built into the instalments over the term.
- Deposit or advance rentals
- Paid at the start, reducing the financed balance.
- Documentation fees
- Charged at set-up, where applicable.
- Option-to-purchase fee
- A final fee under hire purchase to transfer ownership, where included.
- Balloon payment
- A larger final payment, if chosen.
- Settlement and return charges
- For early settlement or lease returns.
Repayment and settlement
- Instalments are usually fixed monthly or quarterly payments.
- A balloon, where agreed, falls due at the end of the term.
- Missing payments can lead to recovery of the asset.
- Early settlement is possible under many agreements, subject to charges.
Checklist for comparing quotes
- 1.Total amount payable including deposit, balloon and fees
- 2.Fixed or variable rate
- 3.Ownership at end of term
- 4.Early settlement terms
- 5.Maintenance and insurance obligations
- 6.Guarantees required
Repayment illustration
Compare asset repayment structures
The first tool compares hire purchase and lease illustrations using the net-of-VAT asset price, deposit, financed amount, term, stated rate, balloon and residual value where relevant. The separate simple model below it uses monthly amortisation with a final balloon and separately paid upfront fees; that model is not a lease quotation. Required money and rate inputs start blank. Compare results as alternatives, not costs to add together.
The financed asset may be repossessed if payments are not made.
Hire purchase and lease, side by side
Enter your asset price excluding vat, deposit / upfront contribution, finance amount, term in months, annual rate, hp final balloon, lease assumed end residual value, upfront arrangement fees to see the breakdown.
1 of 9 required figures entered
Illustrative only, not a binding finance offer. Costs vary by lender and applicant; additional fees may apply and eligibility is subject to assessment. Ocean Capital Exchange is an introducer, not the lender. Product-specific regulatory disclosures require review before production. The asset may be repossessed if payments are not maintained. HP ownership depends on the contract; this lease illustration assumes no ownership transfer. VAT, tax and accounting treatment require structure-specific advice. The financed asset may be repossessed if payments are not made. How this calculator works.
Discuss asset finance options
Speak to our team whenever you’re ready. You don’t need to complete this calculator to discuss your options or request a quote.
Our enquiry form opens in a new tab. Calculator figures are not sent automatically; include any you would like us to review.
Alternative: simple monthly hire-purchase model
Illustrative result
Complete every field to see a result.
0 of 6 required figures entered
Ocean Capital Exchange is an introducer, not a lender or issuing bank. Check the actual repayment schedule, all charges and security obligations with the provider before committing.
Want to discuss these figures? Open our enquiry form (opens in a new tab). Calculator figures are not transferred automatically, so please include any you want us to review.
Asset finance questions
Still unsure? Call +44 20 7183 2026.
What is the difference between hire purchase and leasing?
Under hire purchase, ownership normally passes to you after the final payment. Under a lease, the provider normally keeps ownership and you pay to use the asset.
What is a balloon payment?
A larger final payment that reduces regular instalments. Where interest is charged, leaving more principal outstanding usually increases the overall interest cost. The balloon must be paid or refinanced at the end; refinancing is not guaranteed.
Can I finance used equipment?
Some providers fund used assets, subject to age, condition and value. Criteria vary.
What is asset refinancing?
Releasing cash from equipment you already own, either by selling it to a provider and buying it back in instalments, or by borrowing against it.
Do I need a deposit?
Some agreements require one; others do not. The provider decides.
Who insures and maintains the asset?
Usually the business, as set out in the agreement.
What happens if I miss payments?
The provider may charge default fees and can recover the asset under the agreement.
How is asset finance treated for tax?
Treatment depends on the agreement type and your circumstances. Ask your accountant.
Independent background reading
These independent sources explain general concepts. They do not endorse Ocean Capital Exchange or confirm our providers, product availability or terms. Your provider’s agreement takes precedence over an illustration.
Important information
Ocean Capital Exchange Ltd introduces businesses to third-party providers of asset finance. We are not a lender, do not make credit decisions and do not guarantee that finance will be offered or on what terms. Any facility is subject to the provider's own assessment, due diligence, approval and documentation.
The asset may be repossessed if you do not keep up payments under the agreement.
This page is general information, not financial, legal or tax advice. Worked examples and calculator results are hypothetical arithmetic based on assumed or visitor-entered figures; they are not quotes, offers or typical terms. Business finance may require security or personal guarantees. Read any agreement carefully and take independent advice where appropriate.
Talk through the equipment you need
Tell us about the asset, its cost and how long you will use it. We can explain the options and introduce suitable providers.
- Or call
- +44 20 7183 2026
- Office
- 73 Watling Street, London, EC4M 9BJ