How to sell financed business equipment

So, you bought a vehicle or a piece of equipment with asset finance, but you’ve decided you need to sell it. You might need to free up some cash, you might need to make a big purchase, the vehicle or equipment might not be needed anymore, or it’s in need of an upgrade.

There are lots of reasons you may want to sell business equipment. But if it still has money owing on it, you’ll need to take a few extra steps first.

Can you sell financed equipment?

Yes, you can sell equipment even if it still has money owing on it. But you need to talk to your lender first.

If you have a business vehicle or piece of equipment on finance, it’s likely being used as security for your loan. When something is being used as security, you can’t just sell it.

First, you need to speak to your lender to have the asset released as security.

There are generally two routes.

  1. If your lender has sufficient security being held with you elsewhere, they may simply release the security registered over the equipment you want to sell.

Example: You have a business ute on finance as well as a fleet of trucks. The ute is worth $20k, the trucks are worth 10x that. Both the ute and the trucks are used as security by your lender for your business loan.

If you wanted to sell your ute, your lender may be okay with the trucks being used as security and release the security registered over the ute without issue.

  1. If your lender doesn’t have sufficient alternative security, you may need to promise to settle the remainder of the loan first, or from the proceeds of the sale.

Example: You have a business ute on finance. This is the only security your lender has. The ute is worth $20k, and you owe $5k on it. Your lender may ask you to pay back the $5k before you sell the equipment, or require that the balance outstanding is paid directly from the  sale proceeds. You sell the ute for $20k, give the lender their $5k back, and walk away with $15k in cash.

Selling an asset that still has finance owing on it could get you in serious trouble, so give your lender a call first.

For more information on your options in asset finance and business loans, get in touch with us on 0508 438 227 or make an online enquiry today.

This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact Avanti Finance or your financial adviser. Neither Avanti Finance nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any information, representation or omission, whether negligent or otherwise, contained in this publication. References to third-party websites are provided for your convenience only. Avanti Finance accepts no responsibility for the availability or content of such websites.

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