Chattel mortgage

Find out more about tax effective and structured chattel mortgage options for your vehicle and equipment.

Flexible chattel mortgage to suite your needs

Business vehicle and asset finance, but with all the flexibility and tax benefits you need to maintain a healthy cash flow all year round – with a Chattel Mortgage, you’re in control.

What is a chattel mortgage?

A Chattel Mortgage is one of the commercial finance products available to companies, partnerships and sole traders that need to upgrade or buy trucks, cars, and equipment. With a chattel mortgage, you take ownership of a vehicle or asset from the start. 

Chattel mortgage is a form of secured loan where the finance provider lends you funds to purchase a vehicle, for instance. The ‘chattel’ is the vehicle, and the ‘mortgage’ is a fixed floating charge the lender registers with ASIC to provide security against your borrowing. While your agreement is running, that security helps to keep interest charges lower, and when you’ve paid off the loan, the mortgage gets lifted – giving you clear title to the vehicle. Chattel Mortgage interest rates get fixed for the lifetime of the loan. Repayment terms run between one and five years, although Savvy also has access to lenders that offer seven-year agreements.

  • Borrowers can use a residual value (balloon payment), which brings down regular repayment amounts.
  • A chattel mortgage is secured finance, so interest rates are lower than when your borrowing is not secured. Interest rates get fixed throughout, so it’s easier for a business to budget.
  • You can use a trade-in or cash deposit with a chattel mortgage, or opt to fund 100% of the purchase price.
  • Repayment terms are highly flexible to suit business users. If your revenue is seasonal, you can vary repayment terms throughout the year to match that.

Car loan that means business

Savvy has been in the business of helping commercial borrowers for years. Our consultants leverage established relationships with some of the country’s best lenders to provide excellent interest rates to our customers. Not only that, but Savvy is a mine of information and resources for business owners pushed for time. Our people take your bottom line seriously, and we’ll always go the extra mile to find you the best deal for your needs.

If you’re just starting out on your business journey, or if you’re looking to grow, We’ve got lenders from your main stream banks & financiers right through to niche lenders. No matter where you’re at, we’ll look to provide you with the right guidance as to which solution fits your circumstances. Chattel mortgages work so well for business because they’re highly flexible, but you’ll also enjoy some significant tax benefits when you choose to finance your next vehicle this way.

  • GST gets charged on the purchase price, so when you’re GST registered, you can claim all of that back when you lodge your next Business Activity Statement if you are accounting on a cash basis.
  • GST doesn’t get charged on your monthly repayments. It’s also not applicable when it comes to paying off any residual amount at the end of your agreement.
  • When it comes to tax, you can claim for the interest parts of your repayments as a business expense.
  • With a chattel mortgage, you own the asset from the start of your agreement, so you can claim depreciation.

Getting you approved with your chattel mortgage

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Your chattel mortgage questions answered

Need fast answers? Get to the bottom of the basics about the features and benefits of chattel mortgage finance.

What is a chattel mortgage?

A chattel mortgage is a business vehicle loan made up of the “chattel” (car) and “mortgage” (loan.) The chattel is the asset your business is financing. The mortgage is the loan product you must pay back. The bank or lender may repossess the vehicle in the event of default.

Who is eligible for a chattel mortgage?

To apply for a chattel mortgage, you must be a registered Australian business (an ABN holder) intending to use the vehicle for over 50% business use.

How does a chattel mortgage work?

When a business takes out chattel mortgage, they take ownership of the vehicle (it becomes an asset on the balance sheet.) The financier ties the loan to the value of the vehicle. You pay off the loan in instalments until the mortgage is removed. A business can claim GST, depreciation and interest back on their BAS as a chattel mortgage is a business loan. Business can also structure chattel mortgages with residual value payments (balloon payments) and over 100% finance.

How does low doc chattel mortgage work?

Sometimes, when your business is growing fast, or you’ve not been up and running too long, your accounts may not reflect how well you’re doing. Low-doc lenders look at your current and projected cash flows, time in business, asset position, and many other factors. They can provide approval without the requirement of up to date tax returns.

Can I buy used vehicles or equipment with a chattel mortgage?

Fixed-interest chattel mortgage can be used to buy used assets and business vehicles. That means, when the equipment or vehicle you need isn’t brand-new, you can still reap the benefits of a tax-friendly, customisable chattel mortgage agreement.

What is a balloon payment?

Also known as a residual payment, you can use a balloon amount to adjust your monthly repayments by lowering the proportion of finance you pay off during the set term. Many Aussie business owners choose to limit a residual to the predicted value of the vehicle when their chattel mortgage ends.

Can I use my existing vehicle as a trade-in?

You can borrow 100% of the value of a vehicle or equipment with a chattel mortgage – or choose to use a deposit. That can take the form of cash or a trade-in. Chattel mortgages are designed for business users and give you the freedom to borrow what you need and apply your way.

How do I repay my chattel mortgage?

Chattel mortgage repayment terms run between one and seven years, and you get flexibility as standard. You can tailor things further by adding a residual – which lowers the amount you’ll repay during your agreement. You can even account for seasonal trade by arranging to pay off more during busy periods. Payments are usually monthly and come through a direct debit.

How do I deal with a residual amount?

When your chattel mortgage ends, you can pay off your residual in one of three ways. Trade the vehicle or asset in which pays off the residual and get you started with a new chattel mortgage. Refinance and continue to use the car for a while longer or simply pay out the residual with cash.

Do I need to factor in business usage when calculating tax deductions?

Yes, a chattel mortgage is designed for business, and the tax benefits reflect that. However, it’s important to remember that any tax you claim needs to correspond with the amount of business use your asset or vehicle gets. If you use a car for your business activities only 75% of the time, you’ll need to account for that accordingly. When it comes to claiming for both the interest portion of repayments and any depreciation during your agreement, be careful to only include any usage the ATO allows.

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