The LIXI Data Standards cater for a range of Asset Finance products used by businesses to buy assets such as vehicles or equipment that are described in more detail below.
Often also referred to as an "equipment loan", the finance provider lends money to the customer to purchase movable equipment (the 'chattel'), in return for regular repayments. The customer takes ownership upon purchase, and an ASIC-registered Charge provides loan security. At term, the customer can either pay any residual value (gaining clear title via removal of the Charge), trade in the asset, or refinance the residual value.
In LIXI2, this is represented with a LoanType attribute value of "Chattel Mortgage".
Commercial Hire Purchase
Where the lessor secures and pays for an asset on the lessee's behalf with an offer to hire it back to the lessee for an agreed term. The lessor retains ownership of the asset until the lessee pays it off on a principal plus interest basis. The business will own the asset at the end of the agreement and benefit from not needing to purchase the asset outright, which frees up cash flow on medium-value assets such as office furniture or power tools. For this reason, hospitality businesses often use hire purchase agreements to finance commercial kitchen equipment. Hire purchase is a tax effective way to spread deductible costs over time.
In LIXI2, this is represented with a LoanType attribute value of "Hire Purchase".
An arrangement where a finance company purchases an asset, and use of the asset is granted to the business customer through a series of payments until the end of term, when the customer can acquire ownership by paying the residual value. So the business will have both the use and ownership of business equipment, while the lender will have actual ownership of the asset and very low risk. It’s similar to a hire purchase loan, although in some cases the business can purchase or refinance the asset at the end of the rental term, providing greater flexibility for the customer. Typically lower interest rates compared to other types of equipment finance the business may also be able to claim tax on their finance lease payments.
In LIXI2, this is represented with a LoanType attribute value of "Finance Lease".
Similar to hire purchase and finance lease, an operating lease is an agreement where an asset's owner permits it's use by the customer for a term that is less than the useful or economic life of the asset in return for regular payments. Ownership rights are not transferred and the customer can return the equipment to the owner at the end of term without further obligation. This is commonly used for businesses purchasing IT equipment, as these types of assets often become obsolete within a few years. The business can commonly upgrade the assets purchased within the lease period and can also claim tax on its rental payments.
In LIXI2, this is represented with a LoanType attribute value of "Operating Lease".
First Published: October 21, 2020