Chattel Mortgage
A Chattel Mortgage is a business car finance product available if the vehicle is to be used predominately for business purposes. Very similar to a Secured Car Loan, whereby the financier lends the money to purchase a car or commercial vehicle and takes security over the vehicle by way of a mortgage.
How does a Chattel Mortgage work?
Under a Chattel Mortgage the financier provides funds to the customer for a purchase of a vehicle. The customer takes ownership of the vehicle (the chattel) at the time of purchase.
The financier then takes a mortgage over the vehicle as security for the loan, by way of a Fixed and Floating Charge registered with ASIC.
Once the contract is completed, the charge is removed giving the customer clear title to the vehicle.
Benefits of a Chattel Mortgage
- Flexible Chattel Mortgage terms ranging from 24 to 60 months
- A Residual Value amount, also known as a Balloon Amount, can be applied to the Chattel Mortgage facility enabling monthly payments to be tailored to a budget.
- Fixed Interest Rates
- Repayments are fixed for term of the Chattel Mortgage agreement - no Interest Rate volatility
- Costs are known in advance - cash flow planning & budgeting
- A Deposit can be used (cash or trade in)
- A tax deduction for Interest & Depreciation can be claimed where the vehicle is predominately used for business purposes
- GST is not charged on the monthly repayment or the residual value
- If registered for GST, the customer can claim the GST component of the vehicle purchase price
- Lower Interest Rates as the finance is secured against the vehicle.
Who does a Chattel Mortgage suit?
A Chattel Mortgage is ideally suited for Companies, Partnerships & Sole Traders who use the Cash method of accounting (record expenses as & when they fall due) as it allows them to claim the GST in the vehicle's purchase price upfront.
What are the tax implications of a Chattel Mortgage?
GST is charged on the purchase price of the vehicle, but not on the monthly repayments or the residual amount (ballon amount) if applicable.
The GST component of the vehicle purchase price can be claimed upfront rather than in installments over the life of the Chattel Mortgage agreement.
Where the vehicle is used predominately for business purposes, the hirer can claim the interest component of the lease payments and depreciation up to the luxury car tax threshold or depreciation limit of $57,123.
What other options are availabale other than a Chattel Mortgage?
There are other business car loan & business car finance products that you may wish to consider such as:
Want more information?
If you would like to know more about Chattel Mortgage or any of our other Business Car Loan & Business Car Finance products call us on 1300 361 360 and one of our experienced Finance Consultants will provide you with the right solution for your needs.
You can also Apply Online and one of our Finance Consultants will call you back shortly.