Chattel Mortgage

A Chattel Mortgage is a commercial finance product where the customer takes ownership of the vehicle (chattel) at the time of purchase.

• What is it?
• Why a Chattel Mortgage?
• Who does it suit?
• The Tax Man
• More information

How does a Chattel Mortgage work?

With a chattel mortgage the finance company lends the money to the company to purchase the vehicle. The vehicle becomes the companies asset immediately, except the Finance Company will have the mortgage on the vehicle as security until all of the money is paid back.

Once the loan has been repaid in full the company takes full ownership of the vehicle.

Why a Chattel Mortgage?

• Contract terms from 12 to 60 months
• The higher the residual, the lower the payments which can help cash flow
• It has a fixed interest rates
• Repayments are fixed
• You can use a deposit to decrease the loan repayments
• When used for business purposes, Tax Deductions may apply
• The GST on the loan repayments can be claimed
• No GST is charged on the monthly repayments or on the residual amount

Who does this suit?

A Chattel Mortgage is suitable for those companies, partnerships and sole traders who use the cash method of accounting (they record business income and expenses as and when they occur) as it allows them to claim the GST in the vehicle's price up-front.

The Tax Man and your Chattel Mortgage

GST is charged in the purchase price of the vehicle but not the monthly rental or the contract balloon (final instalment).

Where the customer is registered for GST, they can claim some or all of the GST contained in the vehicle price as soon as they lodge their next BAS, rather than over the term of the loan.

Under a Chattel Mortgage the customer can claim the interest charges on the contract and depreciation up to the Depreciation Limit $57,180) as a tax deduction.

Want to know more?

If you have any questions or would like to know more about a Chattel Mortgage, please send us an online enquiry and we will contact you soon.

Alternatively you can use the Online Calculator to get an idea of what you can afford.