Asset finance glossary

The words you'll hear from lenders and brokers, explained in a sentence or two.

Hire purchase: A way to buy an asset with a deposit and fixed monthly payments, taking ownership after the final payment.
Finance lease: A lease where you rent an asset for most of its working life without ever owning it.
Operating lease: A shorter lease where you hand the asset back and the lender keeps the risk on its value.
Contract hire: A type of operating lease for vehicles, often with maintenance included.
Balloon payment: A larger final payment that lowers your monthly payments.
Residual value: What an asset is expected to be worth at the end of the agreement.
Option to purchase fee: A small fee paid at the end of hire purchase to take legal ownership of the asset.
Hard asset: A durable, resellable asset such as a vehicle or machine.
Soft asset: An asset that loses value fast or is hard to resell, such as software, IT or furniture.
Sale and leaseback: Selling an asset you own to a finance provider and leasing it back to keep using it.
Capital allowances: Tax relief that lets a business deduct the cost of qualifying assets from its taxable profits.