Chattel Mortgage
Is owning the equipment important to you and your business? If so a chattel mortgage might be the best approach to finance those critical purchases.
What is a Chattel Mortgage?
A chattel mortgage is a positive financing option that allows you to lower your monthly repayments with a residual or “balloon” payment at the end of the payment terms and take total ownership of the equipment or vehicle throughout.
Essentially, while the equipment is owned by the business, the lender uses the equipment or vehicle as security against the loan. You’ll often hear about chattel mortgage car loan options, but it can be used for many other forms of equipment too.
Chattel Mortgage Vs Novated Lease.
An important comparison to consider
The key difference in the chattel mortgage Vs. novated lease debate is “ownership”. With the chattel mortgage, the lender advances the funds to the borrower to buy and own the asset and registers a mortgage against the purchase. Once the mortgage is paid, the asset title is transferred to the business. With a finance lease, the lender still owns the asset but the borrower has the option to purchase the asset at the end of the lease.
Assuming that ownership is the goal at the end of the repayments, the main difference between these two options are ownership and how GST is charged on the transaction.
However, one additional benefit on the side of chattel mortgages is that novated leases reduce your capacity for finance, those times when you do decide to refinance or purchase a property. Purchasing equipment through your business as a chattel mortgage can assist with this, as this doesn’t reduce your capacity to purchase property.
What are the benefits of a Chattel Mortgage?
Chattel mortgage car finance – or whatever other equipment you’re purchasing – offers several key benefits:
- Provided the equipment is used 100% for business purposes, you are able to claim the interest paid on the facility and depreciation on the equipment as a tax- deduction*.
- A business that is registered for GST may claim the GST in the purchase price of the equipment as an input credit on their next Business Activity Statement (BAS)*.
- They can improve your Business’s cash flow by reducing your monthly repayments.
*The above should be used as a guide, please contact your accountant or Financial adviser to see what is applicable to your business.
Other services
We offer a wide range of services to meet every type of business.
We’re here to help!
We want to know your needs – whether that is for a chattel mortgage or anything other financial product - so that we can provide the perfect solution. Let us know what you want and we’ll do our best to help – we take pride in the close collaboration that we have with every customer, so we’re sure we’ll be able to find the right solution that meets your needs.
FAQs
What is a chattel mortgage?
A chattel mortgage is a financing option where the lender provides funds for your business to purchase equipment or vehicles. Your business owns the asset, while the lender registers a mortgage over it as security until the loan is fully repaid.
What types of equipment can be financed with a chattel mortgage?
Chattel mortgage car loans are the most common, but a chattel mortgage can be applied to a wide range of business equipment, such as plant and machinery, solar systems, and other essential business assets.
What are the tax benefits of a chattel mortgage?
If the asset is used 100% for business purposes, you may be eligible to claim the interest paid on the loan and depreciation of the asset as tax deductions. Additionally, businesses registered for GST can claim the GST on the purchase price as an input credit on their next BAS.
Can a chattel mortgage improve my business’s cash flow?
Yes, a chattel mortgage allows you to structure your repayments with a residual or “Balloon” payment, which can reduce your monthly obligations and improve your overall cash flow.
What happens at the end of the chattel mortgage term?
Once all repayments are made, the mortgage is discharged, and full ownership of the asset is transferred to your business without any further obligations.
Is a chattel mortgage right for my business?
A chattel mortgage is ideal if owning the asset is important to your business and if you want the flexibility to reduce monthly repayments. It's best to consult with your accountant or financial adviser to determine if this option suits your business needs
