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Chattel Mortgage

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What is Chattel Mortgage and how does it work?

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 commonly used to finance the purchase of vehicles, but they may also be used to finance the purchase of boats, tractors, trucks, motorbikes, and a variety of other movable assets. The lender will provide the funds for you to purchase the vehicle, and you will take ownership at the moment of purchase, similar to a secured car loan. In addition, the lender will take out a mortgage on the vehicle as collateral for the loan. And when the contract is completed, you will be the sole owner of the vehicle.

Chattel Mortgage

Features of a Chattel Mortgage

The flexibility of a chattel mortgage is one of its most appealing features. You can adjust almost any of the terms and conditions to suit your business depending on the lender you choose. A customer who is registered for GST may claim the GST contained in the vehicle price as an input credit on their next Business Activity Statement (BAS). Other features of a Chattel Mortgage include:

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

Feel free to contact us via our hotline 1800 010 001 for more information on the suitable Chattel Mortgage packages for you.

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Common questions about chattel mortgages

We do not charge clients but get paid brokerage & commission by the lenders where different lenders pay us differently & brokerage is included into the loan amount.
The commission doesn’t impact your rate where some lenders offer us Volume Based Incentives (VBI) for writing above a certain amount loan.

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.