Does asset finance cost more than a business loan?

2 min read

Secured = lower rateOften below unsecured

Deposit affects costMore down, less financed

Balloon shifts costTo the end

Compare totalsNot headline rate

Why asset finance can be cheaper

Asset finance is secured on the equipment or vehicle it funds, so the lender can recover the asset if you default. That lower risk usually means a lower rate than an equivalent unsecured business loan. For financing a specific, resaleable asset, it is often the cheaper route precisely because of the security involved. See how security affects price.

What changes the total

The rate is only part of the picture. A larger deposit lowers the amount financed and the total cost. The term affects total interest as on any loan. And a balloon keeps monthly payments low but defers a lump to the end and can raise the total. So two asset-finance deals at the same rate can cost very differently depending on structure.

Comparing it to a loan

To decide between asset finance and a general loan for an equipment purchase, compare the total repayable of each over the same period, including deposit and any balloon. Asset finance usually wins on a resaleable asset because of the security; a general loan may suit if you need the flexibility of unsecured funds or are buying something with poor resale value. See lease or buy.

Model both on the true cost calculator, read the asset finance guide, and apply to compare real quotes.

Frequently asked questions

Is asset finance always cheaper than a loan for equipment?

Often, because the security on the asset lowers the rate, but not universally — structure matters. A large balloon, a long term or a small deposit can push the total up, and for an asset with poor resale value a lender may price it less keenly. Compare the total repayable of an asset-finance deal against an unsecured loan for the same purchase before assuming which is cheaper.

Do I own the asset during an asset-finance agreement?

It depends on the structure. On hire purchase you typically own it outright once the final payment (and any balloon) is made; on a lease you use it without owning it. This affects both the accounting and what happens at the end. Ownership at the end is one of the factors to weigh alongside cost when choosing between asset-finance structures.