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Despite consumer challenges, asset finance is an in-demand finance. For Pepper Money’s CY2024 results, total asset finance originations reached $2.9 billion and it showed resilience with steady tier A growth, making up 70 per cent of originations, compared to 63 per cent in the prior year, signalling a shift toward higher credit quality customers.
One notable shift is the growing demand for used vehicles, largely driven by affordability and attractive financing options. The market is also seeing increased interest in passenger vehicles, especially electric and hybrid models, as financing options improve and sustainability becomes a greater priority for consumers and businesses.
As we look ahead, three key trends are set to shape the future of asset finance in 2025 and beyond.
Green asset finance is here to stay
Sustainability is no longer a buzzword – it’s a business imperative. More businesses are prioritising green initiatives and lenders are responding with tailored finance products for electric vehicles (EVs), renewable energy equipment, and energy-efficient machinery. Government incentives, like grants and tax breaks, are further encouraging this shift, making green financing not just an ethical choice but a financially savvy one.
We’ve seen firsthand the rising demand for EV financing, particularly via novated leasing due to the FBT benefits made available. As sustainability becomes a greater focus, we expect green asset finance to be a key driver of growth in the years ahead.
Technology is transforming the borrowing experience
Technology continues to revolutionise asset finance, enhancing speed, efficiency, and accessibility. AI will enable faster, more accurate credit assessments, reducing approval times and increasing accessibility for SMEs.
Online asset finance platforms will offer end-to-end solutions, from application to funding, providing transparency and convenience. We’ve made significant investments in technology to streamline the lending process and the results speak for themselves. In 2024 alone, over 53 per cent of tier A customer approvals and more than 70 per cent of novated lease approvals were fully automated through our Solana platform. Speed to yes is a key driver of customer and partner satisfaction and it’s strengthened further by our ability to provide real-time payments – an area where we lead versus the competition.
Looking ahead, AI-powered credit assessments, real-time payments, and automated document processing will further reduce approval times and improve the customer experience.
These advancements don’t just benefit customers – they empower brokers by providing faster, more predictable outcomes, allowing them to focus on what they do best: building relationships and finding the right solutions for their clients.
Flexible financing solutions are in demand
The days of one-size-fits-all finance are long gone.
Today, businesses and consumers are seeking more adaptable financing options that align with their unique needs. From pay-as-you-go models to lease-to-own agreements and guaranteed future value options for vehicles, lenders are creating products designed for a more dynamic economy.
These flexible solutions give businesses greater control over their cash flow while offering the ability to test assets before fully committing. Doubling down and providing initiatives to give brokers more tools to support their clients in this evolving market is important for those providing these products.
What comes next?
The asset finance market is entering an exciting new chapter – one driven by innovation, technology, and the changing needs of Australian consumers and businesses. As demand grows for greener, faster, and more adaptable financing solutions, lenders will need to stay ahead of the curve.
For Pepper Money, that means continuing to invest in the technology and partnerships that make the process simpler, faster, and more accessible. We’re not just embracing technology for the sake of it – we’re innovating with purpose, building products to meet changing customer needs. We’re working on several innovative product initiatives. This is an evolving space and we want to give our introducers the ability to offer customers products and services that meet modern-day needs.
The road ahead is full of opportunity and those who embrace these changes will be well-positioned to lead the future of asset finance in Australia.
Ken Spellacy is the general manager of asset finance at Pepper Money.