Asset Finance Glossary

A

ABN (Australian Business Number)

A unique 11-digit identifier issued to businesses operating in Australia. Required for most asset finance applications. An ABN with 2+ years of trading history typically qualifies for the best rates.

ACL (Australian Credit Licence)

A licence issued by ASIC that authorises a person or company to engage in credit activities, including providing asset finance. All brokers in our network hold an ACL or operate as authorised credit representatives.

Amortisation

The process of spreading loan repayments over the finance term. In a fully amortised loan, each payment covers both principal and interest, reducing the balance to zero by term end. See also: Balloon Payment.

Asset Finance

A category of business finance where the asset being purchased serves as security for the loan. Includes chattel mortgages, finance leases, and operating leases.

ATO (Australian Taxation Office)

The Australian government agency responsible for administering tax laws. The ATO sets rules for depreciation, GST input credits, and instant asset write-offs relevant to asset finance.

B

Balloon Payment

A lump-sum payment due at the end of a finance agreement, representing the residual value of the asset. Balloon payments reduce monthly repayments but require a larger final payment. Common in chattel mortgages and finance leases. Learn more →

Borrowing Capacity

The maximum amount a lender is willing to lend you based on your income, existing debts, credit history, and the asset being financed. Also called “serviceability.”

Broker

A licensed intermediary who compares loan products from multiple lenders on your behalf. Asset finance brokers typically have access to 20–40+ lenders and can negotiate better rates than going direct. Our service connects you with specialist brokers at no cost.

C

Chattel

A legal term for movable personal property — essentially any physical asset that isn't real estate. In asset finance, “chattel” refers to the vehicle, equipment, or machinery being financed.

Chattel Mortgage

A finance structure where the borrower takes ownership of the asset from day one while the lender holds a mortgage (security interest) over it until the loan is repaid. The most common structure for GST-registered businesses in Australia. Full guide →

Commercial Goods Loan

Modern lender terminology for a chattel mortgage. Functionally identical — same ownership, tax treatment, and security structure. Some lenders have transitioned to this term. Learn more →

Comparison Rate

A rate that includes both the interest rate and most fees/charges, expressed as a single percentage. Designed to help borrowers compare the true cost of different loan products. Required to be disclosed by lenders in Australia.

Credit Score

A numerical rating (typically 0–1,200 in Australia) representing your creditworthiness, based on your borrowing and repayment history. Both personal and commercial credit scores are assessed for asset finance applications.

D

Deposit

An upfront payment made by the borrower, reducing the financed amount. Typical deposits range from 0% to 30% depending on credit profile and lender requirements. A larger deposit reduces monthly repayments and may improve your interest rate. Deposit guide →

Depreciation

The decline in value of an asset over time due to wear, age, and obsolescence. For tax purposes, depreciation is a deductible expense that reduces taxable income. Relevant to chattel mortgages where the borrower owns the asset. Depreciation methods guide →

Diminishing Value Method

A depreciation method where the asset loses a fixed percentage of its remaining book value each year. Results in larger deductions in earlier years. The ATO rate for most assets is 200% of the prime cost rate.

E

Effective Life

The period over which an asset can reasonably be expected to produce income, as determined by the ATO. Used to calculate depreciation deductions. For example, the ATO effective life for a truck is 15 years; for a laptop, 4 years.

Encumbrance

A legal claim or lien on an asset, such as a finance company's security interest. When you finance an asset, the lender registers an encumbrance on the PPSR. It is removed when the loan is fully repaid.

Equity

The difference between an asset's current market value and the amount still owed on it. Positive equity means the asset is worth more than the debt; negative equity means you owe more than it's worth.

F

FBT (Fringe Benefits Tax)

A tax paid by employers on non-cash benefits provided to employees, including vehicles under novated leases. The FBT rate and calculation method affect the cost-effectiveness of salary packaging. FBT & novated leases →

Finance Lease

A lease arrangement where the lender owns the asset during the term. The lessee has use of the asset and typically has the option to purchase it at the end for the residual value. Lease payments are 100% tax deductible. Full guide →

Fixed Rate

An interest rate that remains the same throughout the entire loan term. Most asset finance in Australia is fixed rate, providing certainty in repayment amounts regardless of RBA cash rate changes.

Full-Doc (Full Documentation)

A finance application that requires complete financial documentation including tax returns, BAS statements, bank statements, and financial statements. Full-doc applications qualify for the best rates.

G

GST (Goods and Services Tax)

A 10% broad-based tax on most goods and services in Australia. Under a chattel mortgage, the borrower can claim the GST input credit on the purchase price in their next BAS. Under a lease, GST is included in each payment. GST guide →

Guarantor

A person who agrees to repay a loan if the borrower defaults. Guarantors are sometimes required for start-up businesses or borrowers with thin credit files. Directors of companies may personally guarantee asset finance.

GVM (Gross Vehicle Mass)

The maximum allowable total mass of a vehicle including its own weight plus cargo, passengers, and fuel. Important for truck finance as it determines registration class and may affect insurance and finance terms.

I

Input Tax Credit

A credit for the GST included in the price of goods or services purchased for your business. Under a chattel mortgage, the buyer can claim the full GST input credit on the asset purchase upfront.

Instant Asset Write-Off

A tax incentive allowing eligible businesses to immediately deduct the full cost of qualifying assets in the year of purchase, rather than depreciating them over several years. 2026 guide →

Interest Rate

The annual cost of borrowing expressed as a percentage. Asset finance rates in Australia typically range from 5.49% to 14.99% depending on credit profile, ABN age, and asset type. Current rates →

L

Lessee

The party who uses an asset under a lease agreement. In a finance lease or operating lease, this is the business using the equipment or vehicle.

Lessor

The party who owns the asset and provides it under a lease agreement — typically the finance company or lender.

Low-Doc (Low Documentation)

A finance application that requires minimal documentation — usually just a signed declaration, recent bank statements, and ABN verification. Available for established businesses (typically 2+ years). Rates may be slightly higher than full-doc.

LVR (Loan-to-Value Ratio)

The ratio of the loan amount to the asset's value, expressed as a percentage. An LVR of 80% means you've put down a 20% deposit. Lower LVRs reduce lender risk and may result in better rates.

M

Mortgage

A security interest over an asset. In asset finance, a “chattel mortgage” is a mortgage over movable property (chattel), not real estate. The lender can repossess the asset if the borrower defaults.

N

NCCP Act

National Consumer Credit Protection Act 2009 — the primary legislation governing consumer and some commercial credit in Australia. Regulates licensing, responsible lending, and disclosure requirements for credit providers.

Novated Lease

A three-way agreement between an employer, employee, and finance company where the employee leases a vehicle and the employer makes pre-tax salary deductions to cover lease payments and running costs. Full guide →

O

Off-Balance Sheet

A financing arrangement where the leased asset and associated liability do not appear on the lessee's balance sheet. Operating leases are off-balance sheet, which can improve financial ratios. Note: new accounting standards (AASB 16) have changed this for many companies.

Operating Lease

A lease where the lessor retains ownership and bears the residual value risk. The lessee returns the asset at end of term. Payments are fully deductible operating expenses. Suits businesses that turn over assets regularly. Full guide →

Origination Fee

A one-time fee charged by a lender to process and set up a new finance agreement. Typically $200–$800 for asset finance. Also called an establishment fee or application fee.

P

Payout Figure

The total amount required to fully discharge (pay off) a finance agreement at a given point in time. Includes the outstanding principal, any accrued interest, and early termination fees if applicable.

PPSR (Personal Property Securities Register)

An Australian government register where security interests in personal property (including financed assets) are recorded. Always check the PPSR before buying a used asset to ensure it isn't encumbered.

Prime Cost Method

A depreciation method where an equal amount is deducted each year over the asset's effective life. Also called straight-line depreciation. Results in smaller but consistent annual deductions. Depreciation guide →

Principal

The original amount borrowed, excluding interest and fees. Each repayment reduces the principal balance until it reaches zero (or the balloon/residual amount) at end of term.

R

Refinance

Replacing an existing finance agreement with a new one, typically to secure a lower interest rate, adjust the term, or release equity. Break costs may apply to the original loan.

Residual Value (RV)

The estimated value of the asset at the end of the finance term. In finance leases, the ATO sets minimum residual percentages based on term length. The residual determines the balloon payment or end-of-lease purchase price.

S

Salary Packaging

An arrangement where part of an employee's pre-tax salary is used to pay for benefits such as a novated lease vehicle. Reduces taxable income and can provide savings on GST and income tax.

Secured Finance

Finance where the lender has a security interest in a specific asset. If the borrower defaults, the lender can repossess the secured asset. All chattel mortgages and finance leases are secured finance.

Security Interest

A legal right granted to a lender over an asset to secure repayment of a debt. Registered on the PPSR. Prevents the borrower from selling the asset without the lender's consent.

Serviceability

A lender's assessment of whether a borrower can afford the repayments based on income, expenses, and existing debt obligations. Strong serviceability is key to loan approval.

Stamp Duty

A state/territory government tax on certain transactions. Some states charge stamp duty on chattel mortgages or vehicle registrations. Rates and rules vary by state. May be financed as part of the loan in some cases.

T

Term

The duration of a finance agreement, typically expressed in years. Common asset finance terms range from 2 to 7 years depending on the asset type and structure.

Trade-In

Using an existing asset as part payment toward a new purchase. The trade-in value reduces the amount financed. Common when upgrading trucks, utes, or equipment.

U

Unsecured Finance

Finance that is not backed by a specific asset as collateral. Less common in asset finance but available for smaller amounts (under $50K) from some lenders. Typically carries higher interest rates due to greater lender risk.

W

Whole-of-Life Cost

The total cost of owning and operating an asset over its useful life, including purchase price, finance costs (interest), insurance, registration, fuel, maintenance, and depreciation. Important for comparing lease vs buy decisions.

Write-Off (Tax)

A tax deduction that reduces your taxable income. In asset finance, common write-offs include depreciation, interest expenses, lease payments, and the instant asset write-off. Tax deductions guide →