01
Who owns it during the term
Which party holds title, and when that changes. It is the fact everything else follows from.
Asset finance
Eight structures, compared properly.
The same machine can be financed eight different ways, and the differences are about ownership, tax timing and what happens at the end rather than about the machine. One page per structure, each covering who owns what, where the GST and depreciation fall, and who it actually suits.
Hire purchase
The most common way a New Zealand business finances an asset, and the one every other structure on this site is best understood against.
Read onChattel mortgage
The business owns the asset from the first day and grants the financier a mortgage over it. In effect it is close to a hire purchase, and the difference is real enough to matter in a few specific situations.
Read onSecured asset loan
A term loan with equipment as the security rather than a purchase agreement. The one structure here that starts with an asset the business already has.
Read onFinance lease
A lower payment through the term, and a decision waiting at the end of it. The structure is straightforward and the ending is the part most often left unplanned.
Read onOperating lease
The closest thing to a long rental. The financier keeps the asset and the risk of what it turns out to be worth, and the business hands it back.
Read onCommercial lease
Where the equipment, the service and sometimes the consumables arrive as one monthly figure. Convenient by design, and the convenience is what makes the terms worth reading.
Read onSale and leaseback
Selling an asset the business already owns to a financier and leasing it straight back. The machine never moves, the capital comes out, and the ownership goes with it.
Read onBalloon and residual structures
Not a structure in its own right so much as a modification applied to the others. A portion of the principal is left unrepaid until the final day, and every payment before it is smaller.
Read onHow to use these
Two questions narrow eight structures to two.
The eight pages on this hub describe arrangements that overlap heavily, because underneath they are all the same transaction. A business wants the use of an asset now and will pay for it over time, and somebody else is funding the gap. What differs is who owns the asset while that happens, and what the arrangement leaves behind when it ends.
The first question is whether the asset will still be wanted at the end of the term. Where it will, a structure that ends in ownership is almost always right, and hire purchase and chattel mortgage are the two that do that. The higher payment through the term is exactly what buys the outcome, and there is nothing clever to be done about it.
The second is whether the payment through the term is the binding constraint. Where it is not, deferring principal buys nothing and costs interest. Where it is, a residual or a balloon makes an otherwise unaffordable asset affordable, and that is a legitimate use of the structure rather than a trap, provided the amount and the date are known before signing.
Two of the eight answer a different question entirely. A sale and leaseback and a secured asset loan are both about assets the business already owns, and they exist to turn capital tied up in equipment back into working capital. They belong on this hub because they are asset finance, and they are not purchase structures.
What is on every page
The same seven questions, answered per structure.
Every page in this tier answers the same set, so two structures can be compared without reading both end to end.
02
What the payment reflects
Whether the full amount is being amortised or only part of it, which is why payments differ on identical assets.
03
Where the GST falls
Up front or across the rentals, with the accountant caveat attached to every claim.
04
Who claims depreciation
It ordinarily follows ownership, which is why the structure and the tax question cannot be answered separately.
05
What happens at the end
Ownership, a residual falling due, or the asset going back. The part most often left unplanned.
06
Who carries the resale risk
Whether the business or the financier is exposed to what the asset turns out to be worth.
07
Where it does not fit
Every page says who should be looking at something else, because a structure page that only sells is not much use.
The honest limit
What this site cannot tell you.
Every rate band on this site is indicative. Nobody publishing a website in New Zealand can say what a specific business will be charged, because the rate is a function of trading history, the asset, the deposit, the term and a credit assessment, and only the lender sees all five. The bands here describe a market rather than an offer.
The tax framing has a harder limit still. The treatment of a particular arrangement depends on the accounting basis the business uses, the specific contract, the asset category and how the asset is actually used, and no website can see any of those. Every tax statement on this site carries the accountant caveat in the same sentence as the claim for that reason rather than as a formality.
This site is an education site and a calculator. It is not a lender, a broker or a registered financial adviser, and nothing on it is personalised financial advice.
FAQ
Asset finance structures, the general questions
How many structures are there really?
Fewer than the names suggest. Hire purchase and chattel mortgage are close cousins, finance lease and operating lease differ mainly in who carries the residual risk, and balloon structures are a variation applied on top of others. The eight pages here cover the arrangements a New Zealand business is realistically offered, and understanding four of them well covers most situations.
Which is the cheapest structure?
None of them, reliably. On the same asset at the same rate over the same term, the total cost of ownership is broadly similar across structures that end in ownership, and structures that defer principal cost more in total while costing less each week. What varies genuinely is the tax timing and the cash-flow shape, and those are worth more to some businesses than to others.
Does the lender choose the structure or does the business?
Usually the business, within what the lender writes. Most New Zealand asset financiers offer several structures and will quote whichever is asked for, and the one presented by default is frequently just the one that particular lender writes most often. Asking for an alternative quote is normal rather than difficult.
Can the structure be changed after signing?
Not directly. Changing structure means settling the existing facility and writing a new one, which is refinancing rather than amendment and carries whatever settlement cost the original agreement specifies. That is the reason the structure question is worth answering properly before signing rather than after.
Do all structures require the asset as security?
The ones on this site do, which is what makes them asset finance. A facility secured only by a general security agreement or a personal guarantee is business lending rather than asset finance, and it prices differently because the lender has no identified asset to recover. Both are legitimate; they are different products.
Is a personal guarantee required?
Frequently on smaller facilities and on newer businesses, and it is a separate obligation surviving the company’s position. It is more common where the asset is specialised or where the trading history is short, because both weaken what the security alone is worth. Whether it is required is a question for the specific lender.
What happens to the structure if the asset is sold mid-term?
The facility is normally settled from the proceeds, and where the sale raises less than the balance owing the shortfall remains payable. That gap is more likely early in a term than late in one, because asset values fall faster than an amortising balance does in the first years.
Which structure suits a business with tight cash flow?
One with a residual or a balloon, most often, because it lowers the commitment through the term. That is a genuine use of the structure rather than a trap, and it costs more in total. The version that goes wrong is the one where nobody planned for the lump sum at the end, which removes two of the three exits.
Do these structures apply to vehicles as well as plant?
Yes. The arrangements described here are general to business assets, and they are used across vehicles, plant, technology and fit-out equipment alike. What changes with the asset is the term available, the deposit sought and the residual a lender will accept, rather than how the contract works.
Does this site arrange the finance?
No. This is an education site and a calculator, not a lender, a broker or a registered financial adviser. The calculator hands off to Prospa, a New Zealand business finance provider we have a commercial relationship with, and that relationship is disclosed on every page. No personal information is collected here.
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