What is a Chattel Mortgage?
A Chattel Mortgage is a commercial finance product where the customer takes ownership of the vehicle (chattel) at the time of purchase.
How does a Chattel Mortgage work?
Under a Chattel Mortgage the financier advances funds to the customer to purchase a vehicle, and the customer takes ownership of the vehicle (chattel) at the time of purchase. The financier then takes a "mortgage" over the vehicle as security for the loan, by registering their interest over it with the PPSR. Once the contract is completed, the security interest is removed giving the customer clear title to the vehicle.
- Flexible contract terms ranging from 12 to 60 months (one to five years)
- A residual value (balloon) can be applied to the contract enabling the monthly repayments to be tailored to a budget
- Fixed interest rates and monthly repayments
- A tax deduction may be available when the vehicle is used for business purposes *
- A customer who is registered for GST can claim the GST contained in the vehicle price as an input credit on their next Business Activity Statement (BAS)
* Please refer to your accountant for eligibility.
Common questions about chattel mortgage
What are the benefits of a chattel mortgage?
- Flexible loan repayment periods, ranging from two to five years
- The option to set a final balance (Residual Value) payment of between 0 and 60 per cent of the full loan amount (depending on the type and age of the vehicle) to reduce monthly repayments
- The option to put down a deposit to reduce the amount borrowed
- The potential to claim tax deductions if the car is being used for business purposes
- The potential to claim Input Tax Credits if you are registered for GST
- Lower interest rates, thanks to the loan being secured against the vehicle
A chattel mortgage taken out with Stratton Finance also has these additional benefits (subject to lender selection):
- Options of no ongoing fees
- Fixed interest rate and monthly repayments for the duration of the loan
- Repayments can be aligned with your or your business' cash flow
- Quotes available online
What alternatives are there to a chattel mortgage?
It could also be worth considering a car lease and a commercial hire purchase if you’re a business owner looking to finance a vehicle. Alternatively, if you’re an employee looking to finance a vehicle under a car allowance, you may also want to think about a Non-Maintained Novated Lease or a Fully Maintained Novated Lease, both of which come with significant tax benefits.
To discuss your individual needs in detail and secure the right finance option for you, speak to one of the Stratton Finance team on 1300 787 288.
Who should choose a chattel mortgage?
Both businesses and individuals are eligible for a chattel mortgage, as long as the car is being used predominantly for business purposes.
A chattel mortgage is a good choice for those who are registered for GST on a cash accounting basis, as you should be able to claim the GST from the vehicle’s purchase price as an Input Tax Credit on your next Business Activity Statement.
What tax and GST can I expect to pay on a chattel mortgage?
If the car is being used for business purposes, you may be able to claim a tax deduction on the loan interest charges, as well as on the depreciation value of the vehicle, up to the Depreciation Limit set by the Australian Tax Office.
GST is charged on the purchase price of the vehicle and, if you’re registered for GST on a cash basis, you should be able to claim this as an Input Tax Credit on your next Business Activity Statement.
You won’t pay GST on the monthly repayments or the final (Residual Value) payment.
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