Chattel Mortgage Facts

A chattel mortgage is the most popular form of finance for vehicles that are primarily used for business. Want to know the ins and outs of a chattel mortgage and how it can benefit your clients?

How does a chattel mortgage work?

Under a chattel mortgage, you borrow money from a lender to buy ‘moveable’ property – in this case, a car. The lender secures the loan against the car (much like a secured loan) and holds the mortgage until the loan is repaid.

Will I own the car outright?

Yes, you can own the vehicle outright at the end of the term, but until the finance is repaid the lender holds a ‘mortgage’ over it, as security. Once you’ve paid the loan out in full, the mortgage is removed. Alternatively, if at the end of the loan term you haven’t paid the loan out in full, you can choose to re-finance the residual value or trade the vehicle in for a new one.

What are the product features?

  • Fixed interest rates and monthly repayments over the term of the loan
  • Choice of flexible repayment periods spread over one to seven years
  • Option to reduce monthly repayments through a residual or balloon payment (only available one to five years)
  • You can finance the total purchase price, pay a deposit or use a trade-in to reduce the loan amount
  • Minimal capital outlay so you don’t eat into your cash flow

Are there tax benefits?

  • You can potentially claim tax deductions on the loan interest charges if you use the car primarily for business purposes
  • If you are registered for GST you may be able to claim input tax credits on your BAS
  • Business owners may also benefit from claiming vehicle depreciation in their tax return

Who does this finance product suit?

Both businesses and individuals are eligible for a chattel mortgage, as long as the car is being used predominantly for business purposes.

Use these features and benefits as a guide when you are speaking to customers to see if a chattel mortgage is suited to their business and situation. To find out more, give us a call and we’ll help you choose the right loan for your customers.