If you’re a small business owner or a professional who uses vehicles for work, understanding your financing options is key to making the right investment decisions. One popular choice for business vehicle financing is a chattel mortgage. At Residential Lending Group, our team is here to help you navigate this option and find the best fit for your needs.
What is a Chattel Mortgage?
A chattel mortgage is a type of loan specifically designed for purchasing business assets—most commonly vehicles or equipment. Unlike a traditional car loan, the vehicle is treated as a business asset (or “chattel”), and the loan is secured against that asset.
You own the vehicle from day one, while the lender holds a mortgage over it until the loan is fully repaid. This means you can claim the depreciation and interest expenses on your business tax return, potentially offering some tax advantages.
How Does a Chattel Mortgage Work?
- Ownership: You own the vehicle immediately, unlike leasing options where ownership stays with the finance company.
- Security: The lender’s security is the vehicle itself, which means no personal or business property is usually required as additional security.
- Loan Term: Typically ranges from 1 to 5 years, with flexible repayment options.
- Tax Benefits: You may be able to claim depreciation and interest as tax deductions, which can improve your cash flow.
Who Can Benefit from a Chattel Mortgage?
Chattel mortgages are ideal for business owners who:
- Use vehicles primarily for business purposes.
- Want to claim tax benefits on depreciation and interest.
- Prefer to own their vehicle outright rather than leasing.
- Need flexible loan terms to suit their cash flow.
What Should You Consider?
- GST: When buying through a chattel mortgage, GST is payable upfront on the purchase price, although you may be able to claim this back in your BAS.
- Loan Eligibility: Lenders will assess your business financials and credit history to determine eligibility.
- Residual Value: Unlike leases, chattel mortgages do not usually have a balloon payment or residual value at the end of the loan term.
Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Lending criteria, terms, and conditions apply. Eligibility and loan terms vary between lenders. You should seek personalised advice from a qualified mortgage broker or financial adviser before making any borrowing decisions.