Chattel Mortgages

Chattel mortgage

A chattel mortgage is a business finance product whereby you take ownership of the vehicle at the time of purchase.

How does a chattel mortgage work?

The finance provider funds the purchase of the vehicle and takes a mortgage over the vehicle as security for the loan. Once the contract is complete, the mortgage is removed and a clear title is given to the motor vehicle.

Balloons and terms

The balloon is the amount that will need to be paid to the finance provider at the end of the loan. By having a balloon the monthly repayments are cheaper and far more affordable. You make the decision to have a balloon payment and you may also choose to pay the vehicle down to zero which means once the final repayment is made, you own the vehicle.

What are the benefits of a chattel mortgage?

Terms range from 12 to 60 months Tax deductible if usedWho should consider a chattel mortgage?

A chattel mortgage is suitable when you use your vehicle wholly or predominantly for business purposes, ie the vehicle must be used for business purposes for more than 50% of the time. It is also a great option if you would like to own the vehicle at the end of the loan.

What are the tax implications of a chattel mortgage?

The monthly repayment or balloon amount is not subject to GST. Where the vehicle is used for business purposes, the hirer can claim "interest and depreciation", ie the interest on the repayments and depreciation up to the luxury car tax threshold or depreciation. GST may also be claimed on the purchase price of the vehicle in one lump sum amount.