This type of loan allows a customer to purchase a vehicle by using another moveable property item as chattel such as other business equipment or another vehicle which is put under mortgage so as to secure the new loan. Due to the mortgage on the securing property the ownership is transferred to the customer from the beginning of the loan.
This type of loan is ideal for businesses who use the cash method of accounting as they are able to claim the GST associated with the vehicle’s purchase upfront.
What is a Chattel Mortgage?
Under this type of loan the financier agrees to provide funds to the customer for them to purchase a vehicle for business purposes. Ownership is adopted by the customer from the outset of the loan. In return for this the financier takes a mortgage out on a pre-determined chattel such as another vehicle by way of a Fixed and Floating Charge which is registered with ASIC. Once the entire mortgage has been paid the ASIC charge is removed by the financier and this gives the customer full claim to the title of the chattel item.
Benefits of a Chattel Mortgage
There are several advantages of this type of loan for business owners including tax breaks and GST recompense when using the loan purchase in business statements. The other distinct advantage is that the business is able to take ownership of the vehicle straight away.
- Flexible Chattel Mortgage terms 24-60 months
- Residual Value/Balloon Payment can be used to decrease the regular payments
- Fixed interest rates
- Repayments are fixed for the term of the loan
- Associated costs are known in advance
- Deposit can be used to decrease repayments
- Tax deduction for interest and Depreciation
- GST charged only on the residual value
- For GST registered businesses GST component can be claimed on the vehicle purchase price
- Lower interest rates as finance is secured against the chattel
Tax Information for Chattel Mortgages
The use of the vehicle for business purposes allows the leaser to claim associated expenses through their business. This means that there are some distinct advantages for the customer to increase affordability of purchasing the vehicle for business purposes.
- GST is charged on the purchase price of the vehicle only
- GST component of the purchase price can be claimed upfront
- Claim interest on the repayments
- Claim depreciation on the vehicle up to the luxury car tax threshold
Call one of experience financial consultants on 1300 361 360. Or you can use the quick quote form online and one of our consultants will be in contact with you very shortly.