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 84 months (one to seven 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?
Benefits of a chattel mortgage include flexible loan repayment periods, the option to reduce the monthly repayments by setting a final balance (residual value or balloon), the potential to claim tax deductions if the car is being used for business purposes* and the potential to claim Input Tax Credits if you are registered for GST*
A chattel mortgage can also have additional benefits (subject to lender selection) including a fixed interest rate and monthly repayments for the duration of the loan as well as repayments that can be aligned with your or your business' cash flow.
*Please check with your accountant for eligibility
Who would it suit?
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?
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. Speak to your accountant to find out more.
What is a chattel mortgage and how does it work?
A chattel mortgage involves a finance company lending you the money to purchase a vehicle that will be primarily used for business purposes. Set repayments are then made on a monthly basis.
You’ll own the vehicle outright, however, the finance company will place a “mortgage” over the vehicle, as security against the loan.
Once the loan and any Residual Value (the final balance on the vehicle) has been repaid, the finance company will remove the mortgage. Alternatively, you can choose to re-finance the Residual Value or trade the vehicle in.
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