Same asset, eight ways to pay for it.
An independent guide to how New Zealand businesses finance assets, and a calculator that shows what each structure actually costs. The differences are about ownership, tax timing and what happens at the end rather than about the thing being bought.
Indicative repayment
Weekly
$477/week
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
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Redirecting…
What this is
The structure decision, made visible.
A business financing an asset in New Zealand is commonly shown one structure, given one weekly figure, and asked to sign. The structure they are shown is usually a hire purchase, because it is the most common, and it is frequently the right one. What almost never happens is a clear explanation of what the alternatives would have done differently.
The differences are real and they are not about the asset. A hire purchase and a finance lease on the same machine at the same rate produce different weekly payments, different balance-sheet treatment, a different depreciation position and a completely different situation at the end of the term. One of those differences is visible in the quote. The other three are not.
This site covers each structure on its own page, in the same shape, so they can be compared rather than described. The calculator sits on every page and shows what each costs. Nothing here is a quote, nothing is submitted, and no credit file is touched.
Structures covered
8
Indicative amount range
$5k to $500k
Common terms
24 to 60 months
Personal details collected
None
The structures
Eight ways to finance an asset.
Each page covers who owns the asset during the term, where the GST and the depreciation fall, what the payment reflects, what happens at the end, and which businesses it actually suits. Indicative bands only.
Hire purchase
The default in New Zealand. Full ownership at the end, the depreciation claim with the business, and the highest payment of the eight.
Read onChattel mortgage
Title from day one with a mortgage over the goods. Close to a hire purchase in effect, and different in when ownership passes.
Read onFinance lease
A residual set at inception lowers the payment and defers a decision to the end of the term.
Read onOperating lease
Closest to a long rental. The financier keeps the asset and the resale risk, and it goes back at the end.
Read onSecured asset loan
A term loan with the asset as security rather than a purchase agreement. Useful where the asset is already owned.
Read onSale and leaseback
Selling an owned asset to a financier and leasing it back. Releases capital without losing the use of the asset.
Read onBalloon and residual structures
Deferring part of the principal to the final day. Lower payments through the term, a lump sum at the end.
Read onCommercial lease
Bundled arrangements, sometimes billed per use, common on equipment supplied with a service contract.
Read onSide by side
What actually differs between the four main structures.
The asset does not change. Everything in this table does. Tax treatment in every row is subject to the accountant’s confirmation, because it depends on the specific arrangement and the accounting basis used.
| Hire purchase | Chattel mortgage | Finance lease | Operating lease | |
|---|---|---|---|---|
| Who holds title in the term | The financier | The business | The financier | The financier |
| On the balance sheet | From day one | From day one | Depends on the treatment | Commonly not |
| Depreciation claim | Ordinarily the business | Ordinarily the business | Depends on the arrangement | Ordinarily the financier |
| GST on the purchase | Generally up front | Generally up front | Depends on the arrangement | Typically on each rental |
| Payment relative to the others | Highest | Highest | Lower | Varies, often bundled |
| At the end of the term | Owned outright | Mortgage discharged | A residual falls due | The asset goes back |
| Who carries the resale risk | The business | The business | At the residual | The financier |
How the four common New Zealand asset finance structures differ. Subject to the accountant’s confirmation in every case.
The decision underneath
Two questions settle most of it.
Question one
Will the asset be kept past the term.
An asset the business intends to run for a decade wants a structure that ends in ownership, because the payments stop and the asset keeps working. A hire purchase or a chattel mortgage does that, and the higher payment through the term is what buys it.
An asset that will be replaced on a cycle wants a structure that ends when the cycle does. An operating lease hands the asset back on the same day the replacement arrives, which removes the disposal question entirely rather than leaving an ageing machine to be sold.
Getting this backwards is the most expensive ordinary mistake in asset finance. A term running past the point an asset is replaced means paying for something already traded, and an asset kept for years under a lease means renting something the business could have owned outright.
Question two
Is the weekly figure the binding constraint.
Where a business can comfortably carry the full amortising payment, it usually should, because deferring principal through a residual or a balloon costs interest without buying anything it needs.
Where it cannot, a residual is a legitimate tool rather than a trick. It makes an asset affordable now by moving part of the cost to a date the business expects to be stronger. That is a reasonable trade when the expectation is a plan, and an expensive one when it is a hope.
The honest version of that decision requires knowing the residual amount and its date before signing, and having decided which of settle, refinance or return will happen. A residual that arrives as a surprise removes two of those three options.
Tax treatment
The GST and the depreciation follow the structure, not the asset.
Two businesses buying identical assets on the same day can end up with different tax outcomes purely because one signed a hire purchase and the other an operating lease. Under a hire purchase the GST on the full purchase price is generally claimable in the return covering the period the agreement begins, and the depreciation claim ordinarily sits with the business, both subject to the accountant’s confirmation. Under an operating lease the GST is typically claimed on each rental and the depreciation stays with the financier, again subject to the accountant’s confirmation. Inland Revenue publishes the applicable depreciation rates, and the category a particular asset falls into is a question the accountant is the right person to settle before the documents are signed rather than after.
By situation
Four reasons businesses finance rather than buy.
Businesses rarely start by choosing between structures. They start with a situation, and the situation usually points at one.
Buy plant without using cash
The most common reason of all. Working capital held in the business is usually worth more than the interest on a secured facility.
Read on RenewingRefresh a fleet
Replacing several assets at once, where the equity position across the outgoing units decides what the incoming ones cost.
Read on ReplacingReplace an ageing asset
When repair costs have become unpredictable and downtime has started to cost more than the replacement would.
Read on ReleasingRelease equity from owned assets
Turning an asset the business already owns back into working capital without giving up the use of it.
Read onUsing the calculator
Three inputs, and one thing it deliberately will not do.
01
Enter what is borrowed, not what the asset costs
A deposit or a trade-in reduces the amount financed, and the balance is the figure that matters. Delivery, installation and anything else on the same invoice are commonly financed too and belong in the number.
02
Set the term to how long the asset will be kept
A longer term lowers the weekly figure and raises the total interest. Where the plan is to replace on a cycle, the term and the cycle should be the same number rather than the term being chosen for the payment it produces.
03
Treat the rate as a band rather than a number
Nobody publishing a website can say what a specific business will be charged, because the rate is a function of trading history, the asset, the deposit and the credit assessment. Running both ends of a band shows how much of the decision turns on the rate, which is often less than expected.
The mechanics
Eight guides to how the contracts work.
Hire purchase against finance lease
The comparison most often got wrong, and how to make it honestly.
Read onHow residuals and balloons work
What the lower payment defers, and how lenders decide the number.
Read onLease accounting under IFRS 16
What moved onto the balance sheet, and which businesses it reaches.
Read onGST and depreciation
Where the tax falls under each structure, and who confirms it.
Read onPPSR and security interests
What a financier registers, what it means, and why a search precedes a purchase.
Read onSale and leaseback explained
Turning an owned asset into cash, and what the arrangement really costs.
Read onEnd of term options
Settling, refinancing, returning or trading, and the equity position behind each.
Read onWhat asset lenders assess
The two questions behind every application, and what answers them.
Read onWhat this is not
An education site, and a calculator.
This site is not a lender, not a broker, and not a registered financial adviser. It does not arrange credit, hold client money, or collect personal information. Everything published here is general information about how a class of finance works, which is what New Zealand’s financial advice regime calls class information, and none of it is a personalised recommendation to any individual reader.
There is one commercial relationship and it is disclosed on every page. The calculator’s "See if you qualify" button hands off to Prospa, a New Zealand business finance provider, and this site is paid for that referral. Prospa lends against the trading position rather than against the asset, which means it fits some situations well and others poorly, and saying so plainly is more useful than implying otherwise.
No calculator inputs travel with the referral. The handoff is an outbound link, the figures stay in the browser, and the application, the credit assessment and any offer are entirely Prospa’s.
References
Sources
- Personal Property Securities Register
Backs the statements about security interests being registered against an asset rather than against the seller.
- Inland Revenue depreciation guidance
The published source for the depreciation treatment described in the tax section.
- Inland Revenue, GST
Backs the description of when GST is generally claimable under a hire purchase against an operating lease.
- Financial Markets Authority, financial advice
Backs the distinction drawn between class information and regulated financial advice.
FAQ
Asset finance in New Zealand, questions answered
What is asset finance in New Zealand?
Asset finance is lending where an identified business asset carries the security rather than a property charge or a personal guarantee alone. The lender registers its interest on the Personal Property Securities Register and the business has use of the asset from settlement. Because the security is identifiable and resaleable, indicative pricing generally sits below unsecured business lending for the same borrower.
Which structure is most common?
Hire purchase, by a wide margin, on New Zealand small and medium business asset purchases. It is straightforward, it ends in ownership, and the tax position is the one most accountants and lenders are used to. That does not make it right for every purchase, which is the reason the alternatives have pages of their own here.
What is the difference between a hire purchase and a chattel mortgage?
Largely technical. Under a hire purchase the financier holds title until the final payment transfers it. Under a chattel mortgage the business holds title from the outset and grants the financier a mortgage over the goods. In both, the business is ordinarily treated as the owner for tax purposes and the asset sits on its balance sheet from day one, subject to the accountant’s confirmation.
Why is a lease payment lower than a hire purchase payment?
Because a residual is set at inception and is not repaid across the term, so less is being amortised. The lower payment is buying a deferral rather than a cheaper facility, and the deferred amount falls due at the end. Comparing the two on their weekly figures alone is the most common error in asset finance.
Does the structure change the tax treatment?
Yes, and it is one of the main reasons the choice matters. The depreciation claim ordinarily follows ownership, and GST timing follows the structure. Under a hire purchase the GST is generally claimable up front, and under an operating lease it is typically claimed on each rental, both subject to the accountant’s confirmation. All of this is subject to the accountant’s confirmation on the specific arrangement.
What rate does asset finance carry?
Indicative bands widely observed in the New Zealand market run from around 8% to 16% per annum on asset-secured lending, against a materially higher band on unsecured facilities. That is a description of a market rather than an offer. Only a lender can quote a rate, because it is a function of the business, the asset, the deposit and the term together.
Can an asset the business already owns be financed?
Yes, through a sale and leaseback or a secured asset loan. Both release capital tied up in an owned asset without the business losing the use of it, and both are assessed on the asset’s current value rather than on a purchase price. They are the two structures on this site that do not involve buying anything.
What happens at the end of the term?
It depends entirely on the structure, which is why the choice matters more than the weekly figure suggests. A hire purchase ends in ownership. A finance lease ends with a residual falling due. An operating lease ends with the asset going back. Deciding which of those is wanted before signing is what keeps the options open.
Does the calculator submit anything or run a credit check?
No. The calculation runs entirely in the browser, nothing is submitted, no personal information is collected on this site and no credit file is touched. The figures are indicative and based on the inputs shown. A credit assessment only happens if a reader chooses to approach a lender, which is a separate step on the lender’s own site.
Is anything on this site financial advice?
No. Everything here is general information about how a class of finance works, which New Zealand’s financial advice regime treats as class information rather than regulated advice. Personalised recommendations require a Financial Advice Provider licence this site does not hold. Final rates, fees and approval decisions are made by a lender after its own assessment.
Related
Where to next
Compare all eight structures
One page each, in the same shape, so they can actually be compared.
Read onStart from the situation
Four reasons businesses finance, and what each tends to point at.
Read onAll guides
The mechanics underneath, sourced to New Zealand primary references.
Read onAbout our finance partner
Who Prospa is, what the relationship is, and where it fits.
Read on