Best Chattel Mortgage Interest Rates
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In our chattel mortgage rates guide:
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What are the best chattel mortgage interest rates?
The best chattel mortgage rates generally start from around 7.50% p.a. but can range up to 15% p.a. or higher for some borrowers. To get the best rate — i.e. the lowest rate — a borrower will want to present as little risk to the lender as possible.
In summary, the best chattel mortgage interest rates are for:
- Financing brand-new vehicles or assets
- Business borrowers with a good credit history (you can check your credit score for free before you apply)
- Businesses with a steady income & trading history
- Homeowners (i.e. asset-backed borrowers)
- Borrowers who contribute a deposit towards the loan
- Shorter loan terms (chattel mortgage terms range from 1-7 years)
Chattel mortgage interest rates comparison
This example compares how different interest rates on a chattel mortgage impact the monthly repayments on various loan amounts. The calculations are based on a five-year loan term.
Chattel mortgage amount | $10,000 |
|---|---|
| Monthly repayments with 7.5% p.a. interest rate | $200.38 |
| Monthly repayments with 9.5% p.a. interest rate | $210.02 |
| Monthly repayments with 11.5% p.a. interest rate | $219.93 |
Chattel mortgage amount | $20,000 |
| Monthly repayments with 7.5% p.a. interest rate | $219.93 |
| Monthly repayments with 9.5% p.a. interest rate | $420.04 |
| Monthly repayments with 11.5% p.a. interest rate | $439.85 |
Chattel mortgage amount | $30,000 |
| Monthly repayments with 7.5% p.a. interest rate | $601.14 |
| Monthly repayments with 9.5% p.a. interest rate | $630.06 |
| Monthly repayments with 11.5% p.a. interest rate | $659.78 |
Chattel mortgage amount | $40,000 |
| Monthly repayments with 7.5% p.a. interest rate | $801.52 |
| Monthly repayments with 9.5% p.a. interest rate | $840.07 |
| Monthly repayments with 11.5% p.a. interest rate | $879.70 |
Chattel mortgage amount | $50,000 |
| Monthly repayments with 7.5% p.a. interest rate | $1,001.90 |
| Monthly repayments with 9.5% p.a. interest rate | $1,050.09 |
| Monthly repayments with 11.5% p.a. interest rate | $1,099.63 |
Chattel mortgage amount | $60,000 |
| Monthly repayments with 7.5% p.a. interest rate | $1,202.28 |
| Monthly repayments with 9.5% p.a. interest rate | $1,260.11 |
| Monthly repayments with 11.5% p.a. interest rate | $1,319.56 |
Chattel mortgage amount | $70,000 |
| Monthly repayments with 7.5% p.a. interest rate | $1,402.66 |
| Monthly repayments with 9.5% p.a. interest rate | $1,470.13 |
| Monthly repayments with 11.5% p.a. interest rate | $1,539.48 |
Chattel mortgage amount | $80,000 |
| Monthly repayments with 7.5% p.a. interest rate | $1,603.04 |
| Monthly repayments with 9.5% p.a. interest rate | $1,680.15 |
| Monthly repayments with 11.5% p.a. interest rate | $1,759.41 |
Chattel mortgage amount | $90,000 |
| Monthly repayments with 7.5% p.a. interest rate | $1,803.42 |
| Monthly repayments with 9.5% p.a. interest rate | $1,890.17 |
| Monthly repayments with 11.5% p.a. interest rate | $1,979.33 |
Chattel mortgage amount | $100,000 |
| Monthly repayments with 7.5% p.a. interest rate | $2,003.79 |
| Monthly repayments with 9.5% p.a. interest rate | $2,100.19 |
| Monthly repayments with 11.5% p.a. interest rate | $2,199.26 |
| Chattel mortgage amount | Monthly repayments with 7.5% p.a. interest rate | Monthly repayments with 9.5% p.a. interest rate | Monthly repayments with 11.5% p.a. interest rate |
|---|---|---|---|
$10,000 | $200.38 | $210.02 | $219.93 |
$20,000 | $219.93 | $420.04 | $439.85 |
$30,000 | $601.14 | $630.06 | $659.78 |
$40,000 | $801.52 | $840.07 | $879.70 |
$50,000 | $1,001.90 | $1,050.09 | $1,099.63 |
$60,000 | $1,202.28 | $1,260.11 | $1,319.56 |
$70,000 | $1,402.66 | $1,470.13 | $1,539.48 |
$80,000 | $1,603.04 | $1,680.15 | $1,759.41 |
$90,000 | $1,803.42 | $1,890.17 | $1,979.33 |
$100,000 | $2,003.79 | $2,100.19 | $2,199.26 |
What impacts chattel mortgage interest rates?
Here are the main factors lenders consider when determining the interest rate on your chattel mortgage. These are general factors that may apply – each lender assesses risk differently based on their own underwriting guidelines.
1. The age of the asset
Chattel mortgage interest rates are generally lower if you buy a new or demo vehicle than they are if you are buying a used car. Newer vehicles generally have a higher resale value, which is less risky from a lender’s perspective. Brand-new vehicles under 4.5 tonnes will offer the lowest rates. Based on analysis by Money.com.au, chattel mortgage providers only provide secured finance for vehicles or assets less than 12-15 years old.
2. The type of asset or equipment
Interest rates are generally higher if you’re using a chattel mortgage to finance heavy vehicles, plants, machinery, or equipment. Lenders may charge a 2-6% loading on these assets. This may apply to yellow goods for construction, trailers, medical or dental equipment, and even office and IT hardware.
Secondhand or specialised vehicles or assets typically have less resale demand (e.g. dog wash van, gym equipment) and will come with higher rates as a result.
3. Your business revenue & trading history
Lenders determine chattel mortgage interest rates based on risk. Established businesses with a consistent income and a track record of successful trading are typically considered less risky, making them eligible for lower interest rates than startups or businesses operating for less than two years.
4. Your business & personal credit rating
Chattel mortgage providers will generally check your business credit score and the credit rating of your company directors. They will look for the likes of missed payments, defaults and insolvencies (e.g. bankruptcies).
Based on our analysis of various business lending criteria, lenders generally look for a minimum director credit score of 500-600 and a minimum company credit score of 475-500. Having a good credit score may mean you qualify for a lower rate.
5. Your business assets & liabilities
When determining your chattel mortgage interest rate, lenders generally consider your business revenue and expenditure, any assets your business already owns (like equipment or vehicles), and current debts. Having fewer liabilities on your business balance sheet relative to assets can qualify you for a better interest rate and higher borrowing amount.
6. Whether it’s a dealer or private sale
Most lenders prefer that you buy a business vehicle or equipment from a licensed dealer, as you generally get a statutory warranty (a warranty that covers defects) with the purchase. You generally don’t get a statutory warranty through a private sale, although the manufacturer’s warranty may still be valid. Some lenders may apply a rate load of 0.50-1% on private sale purchases.
7. Whether you’re a homeowner
Business borrowers who own a home (or any residential property) are considered less risky than renters. That’s because homeowners are ‘asset-backed borrowers’ who may have the ability to borrow against their home equity to settle their outstanding debt. Based on Money.com.au borrower data, the majority of business owners applying for a chattel mortgage own a home (58%), compared to 30% who rent.
Borrowers who own a home generally qualify for a lower rate on their finance and can generally borrow more than non-property owners. According to our data, homeowners requested an average chattel loan amount of $117,269, while renters requested an average of $72,385.
How to compare chattel mortgage rates
The best way to compare interest rates on a chattel mortgage is to get personalised quotes from multiple lenders and look at the comparison or 'effective' rate that applies to each option. This is the rate you’ll be paying once all fees have been taken into account.
Sometimes, a slightly higher advertised interest rate with low fees can work out to be cheaper than a lower interest rate with high fees.
Why the lowest chattel mortgage rate is NOT always the cheapest
This table shows how a chattel mortgage with a lower interest rate (chattel mortgage 1) may cost more than a chattel mortgage with a slightly higher interest rate (chattel mortgage 2) once fees are taken into account.
| Chattel mortgage 1 | Chattel mortgage 2 | |
|---|---|---|
Chattel mortgage amount | $80,000 | $80,000 |
Advertised interest rate | 8% p.a. | 8.25% p.a. |
Application fee | $550 | $0 |
Monthly account keeping fee | $10 | $0 |
Comparison/effective rate | 8.55% | 8.25% |
Loan term | 5 years | 5 years |
Monthly repayment | $1,632.11 (incl $10 monthly fee) | $1,631.70 |
Total to be repaid | $98,477 | $97,902 |
Cost difference | +$545 |
How could a balloon payment impact your chattel mortgage interest costs?
Depending on the lender, you may have the option to include a balloon payment as part of your chattel mortgage. This is a residual lump sum due at the end of the loan term to pay the remaining loan balance.
Including a balloon payment in your chattel mortgage reduces your regular repayments, but it will result in paying more interest overall. That’s because you'll be paying interest on the full balloon payment amount over the entire loan term (instead of paying down the full loan amount gradually).
The lower the balloon payment, the less interest you pay. The balloon payment can range from 20-40% of your loan amount, depending on your agreement with your lender.
Businesses may opt for a balloon payment to help preserve cash flow throughout the loan term. You can use our chattel mortgage repayment calculator to estimate the impact of a balloon payment on your repayments and total finance cost.
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GET STARTEDGET STARTEDFAQs about chattel mortgage interest rates
How can I get the lowest interest rate on a chattel mortgage?
The interest rate on your chattel mortgage is always relative to your business risk profile when you apply for finance.
You generally must be a prime business borrower to qualify for the lowest interest rate. This includes having a steady income, a solid trading history spanning at least two years and a good credit rating.
Consider engaging a finance broker to ‘shop rates’ and potentially negotiate a better rate on your behalf. Even a 0.15% difference in your rate can significantly impact your overall costs, especially if you’re borrowing a large sum over a 5 or 7-year loan period.
Chattel mortgages have lower interest rates, than an unsecured business loan.
How do the 'Five Cs' of credit affect your chattel mortgage rate?
The Five Cs of credit is a credit appraisal model lenders use to assess your credit readiness and determine your chattel mortgage interest rate. Here’s what the five Cs stand for:
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1. Character: This is your business’ overall creditworthiness, based on your history of paying back other loans and credit. Lenders will generally put you into a credit category, either as a prime, non-prime or subprime borrower. Credit categorisation varies between lenders.
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2. Capacity: This is your ability to repay the loan and your business debt-to-income ratio — the percentage of your business gross monthly income used to pay your monthly debt. Some lenders may also look at liquidity ratios (how quickly you could liquidate assets to repay debts), according to Business Queensland.
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3. Capital: This refers to any deposit you contribute towards the payment of the loan. A deposit reduces your debt, and your loan repayments.
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4. Collateral: The type of asset securing the debt. With a chattel mortgage, the vehicle or asset is used as collateral for the loan. This means the lender can reclaim the asset if you default.
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5. Conditions: These are the terms and conditions attached to the chattel mortgage when you submit your application and during the loan term. For example, the vehicle or asset must be used for business at least 51% of the time. This also includes the different eligibility and application requirements for business owners applying for a chattel mortgage.
Is the interest on a chattel mortgage tax deductible?
Yes, the interest component of your chattel mortgage is tax deductible as a business expense, according to the ATO. You can also claim the GST on the initial purchase as a tax credit on your Business Activity Statement (BAS) for the relevant period and the asset’s depreciation (decrease in value). You can only claim deductions for the business use of the asset (private use will not be deductible).
If you’re financing a vehicle, the GST credit you can claim is capped at 1/11th of the car limit for depreciation set by the ATO each year.
- For 2023-24, the car limit for depreciation is $68,108.
- The maximum amount of GST you can claim during that year is 1/11th of that cost limit — $6,191.
The car limit for depreciation applies to passenger vehicles with less than a 1 tonne load and fewer than nine passengers. It excludes motorcycles or similar vehicles.
Can I get a variable rate on my chattel mortgage?
The interest rate on a mortgage is usually fixed for the term of the loan, but you may be able to get a variable rate depending on the lender. Businesses usually prefer fixed rates, as it means the rate is locked in for the entire loan term, and repayments are fixed (making it easier to budget for). With a variable chattel mortgage, the rate could go up or down in line with the market.
How can I lower repayments on my chattel mortgage?
There are a number of ways you can reduce the repayments on your chattel mortgage:
- Opt for a balloon payment at the end of the loan term
- Contribute a deposit towards your chattel mortgage (reducing your debt and repayments)
- Shop for a lower interest rate or consider refinancing your chattel mortgage to a lower rate if you already have one, bearing in mind that early payout fees may apply
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Written by
Senior Finance Writer
Megan Birot
Reviewed by
Editor
Sean Callery
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