Asset Finance UK 2025: Complete Guide

What is Asset Finance?

Asset finance lets you acquire business assets without paying full cost upfront. The equipment itself serves as security, making approval easier than unsecured loans. £37 billion in UK asset finance in 2024 (Finance & Leasing Association).

What you can finance:

• Commercial vehicles: Vans, trucks, fleet vehicles (£5,000-£100,000)
• Machinery & equipment: Manufacturing, construction, printing (£3,000-£5,000,000)
• IT & computers: Servers, workstations, software (£1,000-£500,000)
• Catering equipment: Ovens, fridges, kitchen fit-outs (£2,000-£150,000)
• Medical equipment: Diagnostic, dental, physiotherapy (£5,000-£500,000)
• Agriculture: Tractors, harvesters, farm equipment (£10,000-£1,000,000)

3 Types of Asset Finance

1. Hire Purchase (HP) - Most Popular

How it works:

• Pay 10-30% deposit upfront
• Make fixed monthly payments (12-60 months)
• You OWN the asset at the end (small option-to-purchase fee £50-£100)

Typical rates:

• New assets: 5-9% APR
• Used assets: 7-12% APR
• Deposits: 10-30% of asset value

Tax benefits:

• Claim capital allowances (write-down value)
• AIA (Annual Investment Allowance) - deduct 100% in year 1 on assets up to £1,000,000
• Interest payments are business expense

Best for: Businesses wanting to own assets, vehicles, equipment you'll keep 5+ years

2. Finance Lease - Tax Efficient

How it works:

• Lease equipment for fixed term (2-7 years)
• Make regular payments
• Never own it - Return, upgrade, or extend lease at end

Typical rates:

• APR: 4-8% (lower than HP because no ownership)
• Deposits: 0-20% (often lower than HP)

Tax benefits:

• 100% of payments are tax-deductible as operating expense
• Asset stays off your balance sheet
• VAT reclaim on payments (if VAT registered)

Best for: Assets that depreciate quickly (IT, vehicles), businesses wanting latest technology, cash flow optimization

3. Operating Lease - Keep Assets Off Balance Sheet

How it works:

• Short-term rental (typically 1-3 years)
• Regular payments
• Return equipment at end

Rates: Similar to finance lease (4-8% APR equivalent)

Best for: Short-term needs, testing equipment, avoiding obsolescence risk

Cost Comparison: Real Example

Approval Rates & Requirements

Asset finance has 70-85% approval rates (higher than unsecured loans) because the equipment provides security.

Typical requirements:

• Minimum 6-12 months trading (some accept pre-start with strong plan)
• UK business bank account
• Credit check (less stringent than unsecured loans)
• Proof of need for equipment
• 10-30% deposit (varies by asset type and credit)

What Gets Approved Easily vs Difficult

Easy Approval (85%+ rates)

• Commercial vehicles: Vans, trucks (high resale value)
• Standard equipment: Common machinery with ready market
• IT equipment: Brand-name computers, servers
• New assets: Direct from manufacturer/dealer

Harder Approval (60-70% rates)

• Specialized equipment: Limited resale market
• Used/older assets: Higher depreciation risk
• Custom/bespoke equipment: Hard to repossess and resell
• Intangible assets: Software, licenses (some lenders decline)

Tax Benefits Explained

Annual Investment Allowance (AIA):

• Deduct 100% of asset cost in first year
• Allowance: Up to £1,000,000 per year (confirmed until March 2026)
• Corporation tax saving: 19-25% of asset value

Example: £50,000 equipment purchase via HP

• Claim £50,000 capital allowance in year 1
• Corporation tax saving: £50,000 × 19% = £9,500
• Effective cost after tax: £40,500

Best Asset Finance Providers UK (2025)

• Aldermore: £5k-£500k, vehicles and equipment, 6-10% APR
• Close Brothers: £10k-£5m, specialist equipment, 5-9% APR
• Lombard (RBS): £3k-£1m, commercial vehicles, 6-11% APR
• Hitachi Capital: IT equipment specialist, 5-8% APR
• Investec: High-value assets £100k+, 4-7% APR

Conclusion

Asset finance is ideal for acquiring business equipment without large upfront costs. With 70-85% approval rates and tax benefits up to 25% of asset value, it's often cheaper than unsecured borrowing.

Choose HP if: You want to own the asset
Choose Finance Lease if: You want maximum tax efficiency and latest equipment
Choose Operating Lease if: Short-term needs or want flexibility