AFN Equipment and Vehicle Finance

As with all finance interest rate is a very important consideration. HOWEVER - it is only one of the considerations. Often the facility with the cheapest interest rate can turn out to be the most expensive.

Although the value of the goods being financed is a consideration, the key element in equipment finance is the demonstrated capacity to service the debt - i.e. cash flows.

Key Considerations Other than Interest Rate (Rates)

What is the effective working life of the equipment or vehicle? - as an example the maintenance costs increase and the value of cars decrease more quickly after 100,000 km. If you travel 25,000km p.a. the maximum recommended term would be 48 months.

Rapid technological change means that most computers and computerised equipment will be obsolete within 1 - 3 years. Other goods such as large printing presses may have a working life of 20 -30 years.

What is the likely value of the vehicle or equipment at the end of the term? To optimise cash flow the concept is to try and match the value of the equipment or vehicle to the amount owing at the end of the term.

Taxation - tax considerations play a major role in determining the choice and structure of a facility. Tax Considerations

Ownership - Is Ownership at the end of the term important? - If the vehicle or equipment is to be upgraded or sold at the end of the term seriously question whether ownership is important. Perhaps Rental may be a better option.