Commercial Finance

Chattel Mortgage

What is a chattel mortgage?

A chattel mortgage is a secured loan designed specifically for business.

It works much like a standard car loan. You take ownership of the asset upfront and use it as collateral for the loan. Once you’ve made the final repayment, you’ll own the asset outright.

Chattel mortgages are most often used to purchase cars, but they can also finance boats, trucks, motorcycles, tractors, and many other kinds of moveable business assets.

Chattel Mortgage

What are the benefits?

The beauty of a chattel mortgage is in its flexibility. Depending on your choice of lender, you can adjust almost any of the terms and conditions to suit your business.

Chattel Mortgage Benefits
Features of a chattel mortgage
  • Immediate asset ownership
  • New or used vehicles/equipment
  • Flexible loan terms, from 1-7 years
  • Fixed interest rate
  • Structured repayments to suit your cashflow
  • Residual value or “balloon” payment options
  • Cash deposit/trade-in or 100% finance
  • Potential tax benefits

* Please refer to your accountant for eligibility

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Common questions about chattel mortgages

To qualify for a chattel mortgage, you must be:

  • A company, partnership, or sole trader
  • Based, registered, and operating in Australia
  • Registered for GST
  • Purchasing a vehicle or equipment for business use.

Many business owners choose a chattel mortgage for its tax advantages, both up front and during the life of the loan. Depending on your circumstances, you may be able to:

  • Claim the GST on the asset’s purchase price on your next BAS
  • Claim the loan interest as a tax deduction
  • Claim depreciation on the value of the vehicle.

You should refer to your accountant or tax advisor for more information about how a chattel mortgage would affect your business.

A residual value or “balloon” payment is a lump sum that isn’t covered by your regular repayments. Your repayments will be lower, but you’ll have a large amount outstanding at the end of the term. Some business owners choose to set up a balloon payment at the expected future trade-in value of the asset.

In Australia, asset lease interest rates currently start at around 3% p.a. Your interest rate will depend on your choice of lender, as well as:

  • Nature and age of the asset you are financing
  • Loan amount and term
  • Frequency of repayments
  • Your business and personal credit history
  • Nature and age of your business
  • Financial health of your business
  • Your trading history
  • Your monthly revenue.

The lowest interest rates are offered to established businesses with a clean credit record and strong turnover, who are financing a brand-new asset.