What are the Features and Benefits of Chattel Mortgages?

A chattel mortgage is a type of commercial car loan. Find out more about its features and benefits right here with Savvy.

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, updated on August 29th, 2023       

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Are you new to the world of commercial car loans? One product you’ll come across is a chattel mortgage. A chattel mortgage is a type of commercial car loan (intended for vehicles for 50% or more business use) that allows business owners:

  • To possess and operate the car upon purchase;
  • Set up the loan according to their needs, and;
  • Claim various tax benefits.

Chattel mortgages – features

One of the main features of a chattel mortgage is that a business takes possession of the car when purchased, so it shows up as an asset on their balance sheets. The business pays off the mortgage until maturity. A chattel mortgage is a type of secured loan (hence the “chattel” part of the mortgage) which means that lenders pass on the savings from lowering their exposure to the client in the form of lower interest rates.

Another great feature of chattel mortgages is that businesses can finance 100% of their vehicle (or vehicles) purchase price with a chattel mortgage. This means you won’t have to pay for the vehicle from your own capital reserves. Chattel mortgages amounts can exceed 100% and spread the costs of extras such as insurance premiums or scheduled servicing.

Businesses and companies can extend their loan terms beyond the usual five years. You can pay off a chattel mortgage in as little as 12 months or as long as seven years, or even beyond (lender permitting.) You can also incorporate a balloon payment, also known as a residual value payment, into the loan. This is a lump sum reserved for immediate payment at the end of the loan. The upside to this is you lower your regular payments as if you’re paying off a smaller loan for the duration.

Chattel mortgages – benefits

Chattel mortgages are structured as business loans. This means you can claim a range of tax benefits.

First off, you can claim the GST paid on the purchase price of your vehicle, usually on your next BAS. You can also claim the fuel input tax credit, deprecation on the car and interest on your repayments. Lenders may claim interest and pass on the saving to you, or you may claim the deduction directly.

For more information about tax benefits with chattel mortgages, it’s wise speaking to an accountant or financial professional. To learn more about chattel mortgages and get a free, no obligation quote, speak to one of the friendly professionals at Savvy!

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