What is a chattel mortgage?
A chattel mortgage is a type of secured business finance commonly used to buy vehicles or other business equipment. With a chattel mortgage, the asset being purchased (known as the ‘chattel’) is registered as security for the loan (mortgage).
This setup reduces risk for the lender, which is why chattel mortgage rates are typically lower than those on unsecured business finance. But it does mean that the lender can reclaim the asset if you default on the loan. The lender must also register their interest in the vehicle or asset on the Personal Property Securities Register (PPSR) until you pay off the loan.
Sole traders and small businesses often use a chattel mortgage to finance vehicles required for work, often due to the tax deductions they offer over a standard car loan. A chattel mortgage can also be known as a goods loan, business car loan or ABN car loan.
According to Money borrower data from 2025, the average chattel mortgage amount requested for vehicles is $71,430 and $157,728 for machinery or equipment. The vast majority of requests (84%) are from small businesses with 1-10 employees.
How does a chattel mortgage work?
A chattel mortgage works similarly to secured car loan, but for business customers. To qualify, the vehicle must be used at least 51% of the time for business.
With a chattel mortgage, you borrow a lump sum (from $10,000 to $1,000,000+) from a lender to buy a new or used vehicle or to finance a piece of business equipment.
You then repay the loan in instalments, with interest, over a fixed term of 1-7 years. Your business has full ownership of the asset from the outset and is responsible for all upkeep and management costs.
Chattel mortgage interest rates start from 6.24% p.a. (for prime business borrowers) depending on the lender, and are usually fixed for the life of the loan.
Benefits and disadvantages of a chattel mortgage
Pros
- Lower interest rates than unsecured business loans.
- Your business owns the asset from the outset.
- Option to include a balloon payment to lower monthly repayments.
- Finance costs may be tax deductible.
- Depending on the loan, you may have the flexibility to repay your chattel mortgage early if you can afford extra repayments.
Cons
- The lender could reclaim the asset if you default on the loan, potentially impacting your business credit rating and operations.
- Opting for a balloon payment at the end of the finance term means you pay more interest overall.
- If you don't have a lump sum to pay your balloon payment, you might need to refinance the balloon amount into a new loan (and pay more interest).
Assets you can finance with a chattel mortgage
You can generally get a chattel mortgage for business vehicles up to 4.5-5 tonnes (depending on the lender) and any business assets with a serial number. Here’s a breakdown of the different asset classes or ‘tiers’ you can purchase with a chattel mortgage.
- Light vehicles (Tier 1) Sedans SUVs Work vans Work utes Motorcycles
- Heavy vehicles (Tier 2) Trucks Buses Specialised vehicles (e.g. refrigerated vans, food trucks) Trailers Yellow goods (e.g. excavators, diggers) Farming & agriculture (e.g. tractors, harvesters)
- Business machinery or equipment (Tier 3) Warehousing equipment (e.g. forklifts, conveyors) Manufacturing equipment Landscaping equipment Office & IT equipment
- Specialised equipment (Tier 4) Commercial kitchen equipment (including appliances) Gym equipment Security systems ATMs Vending machines
Chattel mortgage vs lease vs hire purchase
A chattel mortgage, finance or operating lease, and commercial hire purchase (CHP) are all forms of equipment finance available to businesses in Australia. Each offers different levels of asset ownership and business tax benefits.
Choosing between a chattel mortgage, a lease, or hire purchase mainly comes down to whether you want ownership, or the option of ownership, of the asset you're financing. Here's how the three options work in that respect:
Chattel mortgage: You will own the asset from the start of the finance term.
Lease: You don't own the asset during the term, but you may have the option of ownership when it ends (if it's a finance lease, as opposed to an operating lease).
Hire purchase: you agree upfront to purchase the asset and pay for it in instalments but you won't own the asset until the last payment has been made.
Of course, whether a chattel mortgage, lease or hire purchase will be best will depend on the type of business you operate, your financial circumstances (such as whether you need access to cash flow), your tax position (for chattel mortgage GST benefits) and the type of the asset you wish to purchase.
You’ll also want to consider:
Interest and fees
How much your business will pay in interest and fees with each option
The need to upgrade
Whether you need to upgrade the asset during the term of your finance agreement
GST and other tax
The amount of tax your business can claim on the asset and finance costs
End of the finance term
What you would like to happen to the equipment at the end of the finance term
| Chattel mortgage | Finance lease | Operating lease | Hire purchase | |
|---|---|---|---|---|
Commonly used for | High-value vehicles & machinery | High-value specialist machinery | IT equipment, point-of-sale equipment | High-value tools and equipment |
Asset lifespan | Long term (5-10 years) | Medium-long term (3-10 years) | Short term (1-3 years) | Medium term (3-7 years) |
Commonly used by | Tradies, construction, transport | Construction, mining, medical | Hospitality, IT consultants, retail | Commercial hospitality, tradies |
Almost 4 in 5 chattel mortgages (77.6%) requested through Money.com.au in 2025 are for a vehicle purchase, with the remainder being used for other types of business machinery and equipment.
Who’s eligible for a chattel mortgage?
Eligibility requirements for a chattel mortgage will vary between lenders, but generally include:
- Australian citizenship or permanent residency
- An active ABN or ACN
- GST-registered and at least six to 12 months of trading history
- You must be able to provide bank statements and other proof of eligibility
- A good credit score — the minimum credit score for business lending is around 475 (it could be less if you own a home)
- You must be purchasing an asset that’s eligible to act as security under a chattel mortgage (age limits and other criteria may apply)
Requirements for a chattel mortgage application
When it comes time to apply for a chattel mortgage, the requirements can vary significantly depending on the lender you choose. Banks traditionally have extensive documentation requirements, whereas some specialist lenders require virtually no documentation.
Let’s compare the requirement of a full doc chattel mortgage application versus a low doc business loan application:
Full doc chattel mortgage requirements
- Proof of ID and business ownership
- Two years of business financials prepared by an accountant (P&L statement, balance sheet, BAS)
- 12 months of cashflow projections
Low doc chattel mortgage requirements (loan amounts up to $150k)
- Proof of ID and business ownership
- Signed declaration from company director declaring business turnover
The important thing to remember is that with less documentation you will generally have fewer lenders to choose from. A business loan broker can help you weigh up the pros and cons of choosing the application process with the least friction, versus providing more documentation and opening up more potential lenders.
The majority (nearly 60%) of all chattel mortgage applications we receive are from businesses who have been in business for more than three years.
Chattel mortgage GST & tax benefits
The interest charged on a chattel loan may be tax-deductible as a business expense. If your business is registered for GST, you may also be able to claim a credit for the GST paid on the initial purchase of your business vehicle/asset.
This can be claimed as what’s called an input tax credit on your Business Activity Statement (BAS) for the relevant period, according to the ATO.
- If you’re buying 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 2025-26, the car limit for depreciation is $69,674.
- The maximum amount of GST you can claim during that year is 1/11th of that cost limit — $6,334.
- If the vehicle is used for both business and private purposes, you will need to calculate the breakdown of each for tax purposes, as only the business use portion will be eligible for a deduction or GST tax credit.
Example of claimable GST on a chattel mortgage
Purchase price | |
Vehicle 1 | $50,000 |
Vehicle 2 | $100,000 |
Claimable GST credit | |
Vehicle 1 | $4,545 (full GST credit) |
Vehicle 2 | $6,334 (1/11th of ATO car limit) |
| Vehicle 1 | Vehicle 2 | |
|---|---|---|
Purchase price | $50,000 | $100,000 |
Claimable GST credit | $4,545 (full GST credit) | $6,334 (1/11th of ATO car limit) |
How to apply for a chattel mortgage
Here's our quick guide on how to apply for business finance and get your chattel mortgage approved:
Compare chattel mortgage lenders & interest rates
‘Shop the rates’ between bank and non-bank lenders through a business loan broker. They will be able to show you indicative chattel mortgage rates and fees, plus features from different lenders. Comparing options in this way shouldn’t impact your credit report. Keep in mind that your individual rate usually ends up being different to the lender’s advertised rate.
Prepare your documentation
Gather your bank statements from the last six to 12 months, and your business registration and tax information (e.g. BAS statements, tax returns). Having this ready can be the difference between getting approved on the same day or in a few days. If you’re a relatively new small business borrowing more than $150,000, the lender may require financials prepared by an accountant.
Submit your application
Most lenders have an online application portal you can submit your chattel mortgage application through. You’ll be asked to submit your financial paperwork at this stage, along with any other relevant business information. The lender will also run a business credit check before processing your application to the final stage. If you work with a broker, they will take care of this step completely.
Get your chattel mortgage approved
If you’re still shopping for your business vehicle or asset, the lender may grant conditional approval. If you’ve already found your vehicle or equipment, the lender will check it meets the lending requirements. If it does, your chattel mortgage will be unconditionally approved, and the lender will release the funds.
What factors could help get your chattel mortgage approved?
Phil Collard, Asset Finance Expert
“Think about what’s in your control, like your credit conduct. If there are arrears or dishonours, let's make sure we get those cleaned up. It's not to say we can't still help customers in that position – we can – it's just not going to yield the most cost-effective option. Contributing some deposit can help as well. So rather than looking to borrow the full 100%, if you're able to chip in even 10% it reduces the perceived risk to that lender. It’s not always going to yield you a better deal, but it could mean the difference between getting the chattel mortgage approved or not.”
Phil Collard, Asset Finance Expert
Should you get a chattel mortgage with a balloon payment?
Depending on the lender, you may have the option to include a balloon payment as part of your chattel mortgage. This is a lump-sum residual repayment due at the end of your loan term to pay the remaining loan balance. The balloon payment can range from 20-40% of your loan amount depending on how your finance is structured.
Opting for a balloon payment reduces your regular repayments which can help preserve cash flow, although you’ll owe a larger sum at the end of the loan term. A balloon payment usually means overall interest costs on a chattel mortgage will be higher.
Chattel mortgage with & without balloon payment
Loan amount | |
Chattel mortgage with balloon payment | $80,000 |
Chattel mortgage without balloon payment | $80,000 |
Claimable GST credit | |
Chattel mortgage with balloon payment | $4,545 (full GST credit) |
Chattel mortgage without balloon payment | $6,334 (1/11th of ATO car limit) |
Loan term | |
Chattel mortgage with balloon payment | 5 years |
Chattel mortgage without balloon payment | 5 years |
Interest rate | |
Chattel mortgage with balloon payment | 8% |
Chattel mortgage without balloon payment | 8% |
Balloon payment | |
Chattel mortgage with balloon payment | $16,000 (20% of loan amount) |
Chattel mortgage without balloon payment | $0 |
Monthly repayment | |
Chattel mortgage with balloon payment | $1,404 |
Chattel mortgage without balloon payment | $1,622 |
Total interest payable | |
Chattel mortgage with balloon payment | $20,261 |
Chattel mortgage without balloon payment | $17,327 |
Total to be repaid | |
Chattel mortgage with balloon payment | $100,261 |
Chattel mortgage without balloon payment | $97,327 |
Cost difference | |
Chattel mortgage with balloon payment | +$2,934 |
Chattel mortgage without balloon payment |
| Chattel mortgage with balloon payment | Chattel mortgage without balloon payment | |
|---|---|---|
Loan amount | $80,000 | $80,000 |
Claimable GST credit | $4,545 (full GST credit) | $6,334 (1/11th of ATO car limit) |
Loan term | 5 years | 5 years |
Interest rate | 8% | 8% |
Balloon payment | $16,000 (20% of loan amount) | $0 |
Monthly repayment | $1,404 | $1,622 |
Total interest payable | $20,261 | $17,327 |
Total to be repaid | $100,261 | $97,327 |
Cost difference | +$2,934 |
Phil Collard, Asset Finance Expert
“Balloon payments on chattel mortgages aren't as popular as they used to be and I've always been a fan of not having a residual where possible. The reason being, a lot of people tend to forget they have it coming down the track. But if you are going to have it, we can help by walking you through the process and how it works. It’s not just about knowing you have a lump sum at the end of the loan, it’s understanding how to structure the balloon to favour your business.”
Phil Collard, Asset Finance Expert
What happens at the end of a chattel mortgage?
After repaying your chattel mortgage, you’ll have unconditional ownership of the vehicle and the asset will be removed from the PPSR. If there’s a balloon payment at the end of the finance term, you could:
- Pay the residual balloon and keep or sell the asset as you wish
- Refinance the balloon amount into a new loan and pay it off in regular instalments (with interest)
- Trade your asset to purchase another with a new finance agreement, repaying the balloon amount in the process (generally using the proceeds from the trade-in).
Chattel mortgage fees
Establishment fee: $150- $550
Documentation fee: $150-$495
Monthly account keeping fee: $0-$10
Early payout fee: $0-$450
Fees can have a significant impact on your chattel mortgage costs, so take a look at your lender’s fees before deciding if the finance product is right for you.
Top 5 industries requesting a chattel mortgage
Here are the top five industries in Australia applying for chattel mortgages along with the average loan amount requested for each, based on thousands of loan requests submitted through Money.com.au in 2025.
- Building & construction ($77,792)
- IT services ($66,965)
- Cleaning services ($43,159)
- Electrical & lighting ($114,522)
- Gardening ($43,365)
The industry with the highest average chattel mortgage size is Machinery & Equipment Manufacturing. These businesses requested loans of $348,750, on average.
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