Chattel Mortgage

How much funding do you require?

$
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
* Enquiring will not affect your credit score
Testimonial Photo
Dean
star star star star star

"Great and fast to deal with. Would recommend to anyone"

Compare loans from all the best lenders

What is a Chattel Mortgage?


A chattel mortgage is a type of finance used by sole traders and businesses predominantly for the purchase of a vehicle, often due to the significant financial advantages it offers over a standard car loan. To qualify, the vehicle must be used at least 51% of the time for business.

How it works

Chattel mortgages are a fixed-term finance contract with a fixed interest rate, most similar to secured car loans but for business customers. This means the vehicle or vehicles you purchase will still act as security for the loan, but your business can immediately take advantage of the tax benefits of ownership.

If you are approved:

Lender Funding

A lender will provide the funding needed to purchase the vehicle.

Ownership

You will purchase the vehicle and take full ownership and responsibility.

Payment

You will make regular repayments to the lender for a fixed period of time.

Register Mortgage

The lender will register a mortgage over the asset.


Chattel mortgages are required to be registered similar to how a lender secures a home loan by registering the mortgage on a property.

Money Logo Money Tip
Money Tip Image

As the asset will be secured, the interest rate you pay on a chattel mortgage will be lower than most other forms of business finance.


Under this arrangement, you or your business will own the vehicle and assume full responsibility for it as an asset. You will also be responsible for the vehicle’s operating expenses for the duration of your chattel mortgage term, including:

Registration

Registration

Services

Servicing

Insurance

Insurance

Tyres

Tyres

Repairs

Repairs

As the vehicle is a business asset, you could claim a tax deduction for the above operating expenses. If the vehicle is used for both business and private use, however, you will need to assess the percentage that you are claiming as business use.

Lenders

Most banks will offer a chattel mortgage for businesses. Otherwise, you could choose to apply with:

List icon

Non-Bank Lenders

List icon

Specialist Asset Finance Lenders

List icon

Finance Brokers

Money Logo Money Tip
Money Tip Image

Specialist Asset Finance lenders offer a streamlined application process, making them an appealing option for a chattel mortgage.

How much funding do you require?

Find the best rate now.
Get a quote
How to qualify

How to qualify

Anyone wishing to finance a vehicle predominantly for business purposes can apply - the vehicle must be used within the business at least 51% of the time. This makes them ideal for tradies and other business owners who want to finance a vehicle primarily for work, but still drive it around on the weekend as well.

As a chattel mortgage is specifically designed for businesses, you can apply if you’re:

List icon

A sole trader - i.e. tradie - financing a vehicle predominantly for business use

List icon

Self-employed and an ABN holder

List icon

Financing a company car or fleet as a business asset

List icon

Financing industrial vehicles or machinery for business use.


Lender approval criteria will vary, though provided you can supply the appropriate documents and have a good credit history, you’ll likely be approved.

How to apply


If you’re buying a vehicle to the value of $150,000, most lenders will offer a chattel mortgage if you:

List icon

Have been in business 12 months; and

List icon

Have an ABN; and

List icon

Are registered for GST; and

List icon

Have a clean credit history

List icon

Are currently renting and can provide a 20% deposit; or

List icon

Own a home

How to apply

If you’re looking to finance a vehicle greater than $150,000, or have been in business less than 12 months, you’ll need to apply through the standard loan application process.

If this is the case, you’ll need to provide additional documentation to the lender so they can better assess your application. Here are some tips to improve your chances of getting approved:

List icon

Demonstrate the ability to service your equipment loan or lease.

List icon

Meet the lender’s criteria, such as:

  • An ABN and GST registration
  • An acceptable credit rating
  • A minimum level of turnover
  • A maximum level of other debt
List icon

Supply all your supporting documents, such as:

  • Proof of identity
  • Financial records (provided by your accountant)

    - Profit and Loss Statements
    - Balance Sheet
  • Details of the asset you wish to purchase
  • Business bank statements
  • Rates notice (if you own a home)
  • Rental agreement (if you are renting)


If you are self-employed and an ABN holder, you can still apply for a chattel mortgage. You can read more about self-employed applications in our guide on Low Doc Business Loans.

Money Logo Money Tip
Money Tip Image

You should always research a specific lender’s criteria before applying, and compare lenders to find the best rates and lowest fees on a chattel mortgage.

Chattel mortgage tax advantages

If your business is registered for GST on a cash basis - i.e. it records business income and expenses as and when they occur - it can claim the GST on the initial purchase price of the vehicle as an input tax credit on the first Business Activity Statement (BAS) following the establishment of the chattel mortgage.

If you'd like to find out if the tax benefits are more suitable for your business than other forms of equipment finance, you can read our individual guides to compare the benefits of:




If you’re taking out a chattel mortgage:

List icon

The vehicle becomes an asset on the business’s balance sheet

List icon

You can claim the initial purchase-price GST back on your next BAS

List icon

You can claim depreciation on the vehicle in your tax return

List icon

A balloon payment can help reduce your repayment amounts and maintain business cash flow

List icon

All interest is tax deductible

In the case of depreciation, there is a maximum amount for vehicles, which is set each year by the Australian Tax Office. As of March, 2019, the cost limit on vehicles is $57,581 for both GST and depreciation. The maximum amount of GST claimable is 1/11th of the cost limit - currently $5,234.

Chattel Mortgage Vehicle Price versus Claimable GST Table

Vehicle One

Vehicle Two

Vehicle Three

Purchase Price
$40,000
$60,000
$100,000
Claimable GST
$3,636
$5,234
$5,234
Reason
Vehicle below cost limit, full GST on the purchase price can be claimed
Vehicle is above the cost limit, only $5,234 of GST can be claimed
Vehicle is above the cost limit, only $5,234 of GST can be claimed
Money Logo Money Tip
Money Tip Image

Check the eligibility of your business to make these kinds of deductible claims under a chattel mortgage with your accountant or other trusted financial adviser before entering into a finance agreement.

Chattel mortgage for sole traders

For sole traders, a chattel mortgage can provide significant benefits not available under most other forms of car finance. As the vehicle is being used largely for business purposes, you may be able to claim some or all of the interest and depreciation costs as tax deductions as well.

Common Australian Trades for a Chattel Mortgage

Tradies A - E

Tradies F - L

Tradies M - Z

List icon
Arborists
List icon
Fencers
List icon
Mobile Mechanics
List icon
Builders
List icon
Glaziers
List icon
Painters
List icon
Carpenters
List icon
Handymen
List icon
Plasterers
List icon
Caterers
List icon
HVAC technicians
List icon
Plumbers
List icon
Cleaners
List icon
Labourers
List icon
Pool Servicing
List icon
Couriers
List icon
Landscapers
List icon
Removalists
List icon
Electricians
List icon
Locksmiths
List icon
Tilers

Most Common Vehicles Purchased With Chattel Mortgage

Small Vehicles

Large Vehicles

Machinery

List icon
Cars
List icon
Delivery Vans
List icon
Diggers
List icon
Motorcycles
List icon
Trucks and Trailers
List icon
Forklifts
List icon
Work Vans
List icon
Caravans
List icon
Mowers
List icon
Work Utes
List icon
Buses
List icon
Tractors

Chattel mortgages are commonly used by companies looking to purchase heavy machinery - such as transport truck and trailer combos, delivery trucks, excavation machinery, and other mining equipment.

Money Logo Money Tip
Money Tip Image

A chattel mortgage will often provide better rates for sole traders than other forms of vehicle finance, such as unsecured personal loans.

Chattel mortgage balloon payments

Balloon or ‘residual’ amounts are essentially lump-sum repayments due at the end of the loan term. Chattel mortgages can be set up to include a balloon amount, which results in lower scheduled repayments at the cost of a higher final payment.

This is often the case when a business wants to conserve cash flow at the time of taking on the chattel mortgage. Otherwise, the business may choose to pay off the vehicle without a balloon and simply own the vehicle once the loan is repaid.

You can use the Chattel Mortgage Calculator to quickly compare repayments and balloon payment amounts.

Balloon Payment

Chattel Mortgage Balloon Payment Calculation Table

Loan Amount

Loan
Term

Balloon
Amount

Interest
Rate

Monthly Repayments

$50,000
5 years
$0
6%
$966.64
$50,000
5 years
$20,000
6%
$679.98

Important: This is a hypothetical calculation as an illustration of how balloon payments affect monthly repayment amounts.

Fees

Chattel mortgages typically attract lower interest rates and fees than some alternative forms of car finance, such as unsecured personal loans. Just like many car finance agreements, the rate is typically fixed for the term of the loan.

You can read our guide to learn more about chattel mortgage interest rates in Australia.

Money Logo Money Tip
Money Tip Image

A fixed-term interest rate means any changes to lender rates during the loan period will not affect your repayments, or business cash flow.

Terms

Loan terms for chattel mortgages are often flexible to suit the borrower, though most lenders will offer an agreement between two and five years.

Minimum and Maximum Terms

Minimum Term

Maximum Term

2 years
5 Years
Money Logo Money Tip
Money Tip Image

In some cases it’s also possible to borrow more than 100 per cent of the vehicle’s up-front cost. This means you can potentially include any associated costs, such as vehicle vinyl wraps and registration.

Deposits and Trade-ins

Although you won’t be required to put down a deposit in most cases - and lenders will generally finance 100% of the asset price through a chattel mortgage - you can certainly place down a deposit to lower your monthly repayments if you wish to.

If you have an existing vehicle you will be trading in, you can use the trade value of your old vehicle to purchase the new vehicle, which will also reduce the amount borrowed and, therefore, your monthly payments.

Options at the end of the term

At the end of a chattel mortgage, you or your business will need to pay the balloon payment - if there is one - and you will have a few options.

List icon

Trade the vehicle in and purchase another with a new finance agreement, repaying the balloon amount in the process (generally using the proceeds from the trade-in).

List icon

Repay the balloon with funds at hand, and retain or sell the vehicle independently.

List icon

Refinance the balloon amount and retain the vehicle.

Money Logo Money Tip
Money Tip Image

At the end of the term, you can refinance the balloon amount as a standard car loan and use the vehicle for personal use 100% of the time.

Summary

Chattel mortgages in Australia offer greater benefits for businesses than many other kinds of finance, and is suitable for all kinds of businesses wishing to purchase company vehicles or machinery.
In summary:

List icon

Allows a business to finance a vehicle if it is used for business purposes 51% of the time.

List icon

Allows the business to benefit from ownership of the vehicle immediately.

List icon

May include a balloon payment to lower monthly repayment costs.

List icon

Generally has lower rates and fees than other forms of vehicle finance.

List icon

Uses the financed vehicle as security.

List icon

Offers GST, depreciation, and tax-deduction benefits on a vehicle.

List icon

Is generally set between 2 - 5 years.

List icon

May include early repayment or termination fees.

Summary

Pros and Cons

Pros

Cons

List icon
Immediate ownership of the vehicle (once paid)
List icon
Monthly instalments and the residual balance (balloon) are not tax deductible.
List icon
The vehicle is recognised as an asset to the business
List icon
Accounting work involved in claiming GST and deductions can involve more work than using a business lease option.
List icon
Fixed rates and monthly repayments
List icon
The business is paying interest on a vehicle as opposed to paying cash and owning it outright.
List icon
Can claim back the GST in the very next BAS
List icon
Can claim depreciation on the vehicle
List icon
Interest on the loan is tax-deductible

Chattel Mortgage FAQ

plus
Can I get a Chattel Mortgage if I have bad credit?

Yes, provided you can display your ability to repay the loan amount. As a chattel mortgage uses the vehicle you wish to finance as security, lenders are more inclined to offer approval to someone with bad credit than they are an unsecured business loan.

plus
Can I finance used cars with a Chattel Mortgage?

You can use a chattel mortgage to finance used cars or vehicles for your business. However, be aware that lenders may charge a higher interest rate if you are planning to buy used cars or vehicles, due to the added risk and lower value of the used asset.

plus
What type of fees can I expect to pay on a Chattel Mortgage?

Chattel mortgages are often free of some of the types of fees and charges often associated with consumer loans and other finance agreements - such as account-keeping fees and other charges. Make sure you understand any fees before signing an agreement with a lender.

plus
What are the disadvantages of a Chattel Mortgage?

There are three main disadvantages of a Chattel Mortgage:

  • All monthly instalments (and the balloon payment) are not tax-deductible
  • A business is paying interest on a vehicle instead of owning it outright
  • For small businesses in particular, there is experienced accounting work required to claim GST

How much funding do you require?

Find the best rate now.
Get a quote
Scroll Top