CHATTEL MORTGAGE

Chattel mortgage explained

The common structure when a business buys a vehicle or a piece of plant. You take title at settlement. The financier takes a mortgage over the asset until the loan is paid out.

Talk through the structure 1300 015 267

Title
Yours from settlement
Security
Mortgage over the asset
GST & depreciation
Your accountant’s call
Lender panel
40+

Is this you?

If any of these are true, we can help.

Talk it through

A business buying a ute, van or truck it intends to own outright at the end
A contractor buying plant where the accountant has asked for the asset to sit on the balance sheet
An operator who has been offered a lease and wants to understand the alternative before signing
A buyer who wants to understand what a balloon really commits them to
A business comparing a chattel mortgage against a rental agreement on the same machine

How it works

Three moves, in plain words.

Confirm the asset and the price
A supplier quote or tax invoice, with the asset details, the year and any fit-out itemised.
Confirm predominant business use
A chattel mortgage is a commercial contract. The asset needs to be predominantly for business purposes, and that declaration needs to be accurate.
Set term and balloon
Decided against the replacement plan, not against the monthly figure. This is where most of the long-term cost is determined.

Tell us the asset, the price and what you intend to do with it at the end of the term.

Send us the numbers 1300 015 267

What a chattel mortgage is

A chattel mortgage is a commercial loan used to buy a specific asset, most often a vehicle or a piece of equipment. The word chattel simply means moveable property. The structure has two halves. The financier advances the funds and you buy the asset, so title passes to you at settlement. In exchange, the financier takes a mortgage over that asset as security until the loan is repaid.

That is the distinction people miss. Under a lease, the financier owns the asset and you have the right to use it. Under a chattel mortgage, you own it from day one and the financier has a registered claim over it. Ownership and security are two different things, and here they sit with two different parties.

Where one monthly repayment goes

Principal off the loan$1,180
Interest$295
Monthly account fee$15

The repayment stays the same every month while the split inside it moves. Early in the term the interest share is at its largest, and it shrinks with every payment made. Which parts of this your business can claim is a question for your accountant, not for us.

Modelled on a $75,000 five-year chattel mortgage at an assumed rate, early in the term. Illustrative projection only. Not a quote and not an offer of credit.

View as a table

Component	Amount	Share
Principal off the loan	$1,180	79%
Interest	$295	20%
Monthly account fee	$15	1%
Total	$1,490	100%

You own the asset. Someone else holds a claim over it until the last payment clears. Both things are true from the first day.

The detail

Title, security and the PPSR

The financier’s security is registered on the Personal Property Securities Register. Anyone searching the asset can see that an interest is recorded against it, which is exactly why a PPSR search matters when you are buying second hand from a private seller.

The asset is registered in the business name from settlement
The financier registers its security interest on the PPSR
The asset cannot be sold clear of that interest until the loan is paid out
On final payment or payout, the security is discharged and the registration is released

Title: Legal ownership of the asset. Under a chattel mortgage it sits with the business from settlement, which is the whole point of the structure.
Security interest: The financier’s registered claim over the asset. It does not make the financier the owner. It makes the financier the party that has to be paid before the asset can be sold clear.
PPSR registration: The public record of that interest. A buyer, an insurer or another lender can search the asset and see it.
Discharge: The release of the security once the loan is paid out. Worth confirming rather than assuming.
Payout figure: What it takes to settle the contract in full on a stated date, including any early termination costs.
Predominant business use: The test that makes a commercial contract available. Some private use is ordinary; the declared main purpose has to be genuine.

Chattel mortgage against the alternatives

The structures differ on ownership, on what happens at the end, and on how they sit in the accounts. Only the first two are our territory.

Mechanics only. The accounting and tax treatment of each is a matter for your accountant.
	Chattel mortgage	Finance lease	Rental / operating lease
Who holds title	You, from settlement	The financier	The financier
Security	Mortgage over the asset	Not applicable, the financier owns it	Not applicable
End of term	Pay out any balloon and own it clear	Pay the residual or renegotiate	Return, extend or upgrade
Suits	Assets you intend to keep	A lease structure on the books	Assets replaced on a cycle
Early payout	Request a payout figure from the financier	Governed by the lease terms	Governed by the rental terms

Chattel mortgage

The business takes title at settlement and appears on the registration
The financier holds a mortgage over the asset until the loan is paid out
Any balloon is paid out at the end and the asset is then owned clear
Whatever the asset is worth at the end belongs to the business
Common where the asset is intended to be kept and run

Finance lease

The financier holds title for the whole of the term
The business has the right to use the asset under the lease
A residual is payable at the end, or the lease is renegotiated
Ownership does not pass automatically when the term finishes
Common where a lease structure is preferred on the books

Three structures, six questions

	Chattel mortgage	Finance lease	Novated lease
You hold title from settlement	Yes	No	No
Available without an employer’s agreement	Yes	Yes	No
Requires predominantly business use	Yes	Yes	No
A lump sum falls due at the end of the term	Sometimes	Yes	Yes
The asset is yours to keep when the term ends	Yes	Sometimes	Sometimes
Fringe benefits tax sits over the arrangement	No	No	Yes

Ownership is the fork in the road. A chattel mortgage puts the asset in the business name on day one and only carries a lump sum at the end if you chose a balloon. Both leases keep title with the financier and both end with one.

Structural mechanics only. How each is treated in your accounts and at tax time is a matter for your accountant or a registered tax agent.

View as a table

	Chattel mortgage	Finance lease	Novated lease
You hold title from settlement	Yes	No	No
Available without an employer’s agreement	Yes	Yes	No
Requires predominantly business use	Yes	Yes	No
A lump sum falls due at the end of the term	Sometimes	Yes	Yes
The asset is yours to keep when the term ends	Yes	Sometimes	Sometimes
Fringe benefits tax sits over the arrangement	No	No	Yes

Where the asset and the liability come to rest in the accounts — Ownership decides how the purchase appears in your accounts, which is why an accountant often has a preference before you have a quote. Asking them first is a shorter conversation than unwinding a structure later.

Balloon payments on a chattel mortgage

A balloon is a portion of the loan deferred to the end of the term. It lowers the monthly repayment and it leaves a lump sum owing on the final day. Nothing about a balloon reduces what you owe. It moves it.

01Decide what you intend to do with the asset at the end of the term, before you set the balloon
02If you intend to keep it, keep the balloon modest or take none at all
03If you intend to trade or sell, set the balloon somewhere below the likely resale value, not above it
04If you expect to refinance the balloon, understand that this is a new application on an older asset

Worked example · illustrative

Setting a balloon against the exit

The situation: A landscaping business is buying a tipper for around $80,000 on a five-year chattel mortgage, and is offered a balloon of around $25,000 to bring the monthly figure down.
The move: Before agreeing, the owner answers one question: keep the tipper at the end of the term, or replace it. The answer is keep it, because the truck suits the work and is not heavily used.
Where it lands: The balloon is cut back to a figure the business can pay out of trading, rather than a lump sum that would have to be refinanced on a five-year-old truck. The monthly cost rises. The last day of the term stops being a problem.

A composite example, not a specific client. Any figures are indicative and outcomes depend entirely on individual circumstances and lender assessment.

The tax questions, and who answers them

The most searched question about chattel mortgages is the tax treatment, and it is the one question we will not answer. Because the business takes title, the GST position on the purchase price and the treatment of interest and depreciation are handled differently from a lease. How that applies to your business depends on your registration, your accounting method, the proportion of business use and the rules current at the time.

GST on the purchase price and when it can be claimed: your accountant or a registered tax agent
Depreciation and any write-off provisions available in the relevant year: your accountant
Deductibility of the interest component: your accountant
How the asset and the liability appear in the financial statements: your accountant

Applying: the sequence

01
Confirm the asset and the price
A supplier quote or tax invoice, with the asset details, the year and any fit-out itemised.
02
Confirm predominant business use
A chattel mortgage is a commercial contract. The asset needs to be predominantly for business purposes, and that declaration needs to be accurate.
03
Set term and balloon
Decided against the replacement plan, not against the monthly figure. This is where most of the long-term cost is determined.
04
Assemble the file
Entity details, ABN and GST registration, financials or low doc declarations, bank statements and director information.
05
Placement and approval
We take it to the lenders whose appetite matches the asset, the age and the borrower. Conditions are cleared before documents are issued.
06
Settlement and registration
The financier pays the supplier, the asset is registered to the business, and the security interest is registered on the PPSR.

Run the numbers

See it with your own figures.

Indicative only. Change anything — the defaults are starting points, not quotes.

Monthly · indicative$4,280.90$891,124 interest over 30 years

The loan

Loan amount

The amount you are borrowing, after any deposit and before fees. The slider covers the common range — type a larger figure straight into the box.

Interest rate

A starting assumption for you to change, not a rate we are quoting and not a lender product. What you are offered depends on the security, the lender and a full credit assessment.

Loan term

Principal and interest across the whole term, with no interest-only period.

Repayment frequency

Worked out on the real period rate and the real number of repayments, so a fortnightly figure is not simply half a monthly one.

Paying it down faster

Extra repayment each month

Optional. Leave it at zero to see the plain schedule. Anything above zero shortens the term and cuts the interest. The slider covers the common range — type a larger figure straight into the box.

Other debts to roll in

Add the cards, loans or tax debt you would fold into this loan and the repayment covers all of it.

Add a debt

Pick the closest type. It only sets the name — you fill in the numbers.

Monthly repayment

$4,280.90

$650,000 over 30 years at 6.90%, principal and interest.

Total repaid

$1,541,124

Of that, interest

$891,124

Where the money goes

Amount borrowed$650,000

Interest over the full term$891,124

A repayment figure is the easy part. Whether a lender will lend it, on what security and at what cost, is the part we handle. Bring the number you have landed on and we will tell you what is realistic.

Talk it through with a broker

The detail behind that number

Number of repayments: 360 monthly repayments
Total repaid: $1,541,124
Total interest: $891,124
Interest as a share of the amount borrowed: 137.1%

Assumptions

The interest rate is a figure you typed. It is not a current rate, a comparison rate, or a lender product we are offering.
The rate is assumed to stay the same for the whole term. Variable rates move, and a single change resets every figure on this page.
Repayments are principal and interest, equal in size, made on time, with no interest-only period, no repayment holiday and no redraw.
Weekly and fortnightly figures are calculated on the true period rate — the annual rate divided by 12 — and on 360 repayments. They are not a monthly figure divided down.
Interest is calculated per repayment period. A lender accruing daily and charging monthly will land on a slightly different number.
Extra repayments are assumed to start with the first repayment and continue every period, and to reduce the balance immediately with no fee and no break cost.
Other debts you add are added to the amount borrowed and repaid at this loan's rate over this loan's term. No fees for closing them out or rolling them in are included, and a debt that is not reducing today is not modelled beyond its balance.
No fees are included: no establishment, valuation, legal, settlement, discharge or ongoing fees, no lender's mortgage insurance and no broker fee.

Open the full calculator

FAQ

Questions people actually ask

If yours is not here, ask it. We would rather answer the awkward one early than have you find out later.

1300 015 267

Who owns the asset under a chattel mortgage?

You do, from settlement. The business takes title and the financier registers a mortgage over the asset as security. That security is discharged when the loan is paid out. This is the main structural difference between a chattel mortgage and a lease.

Can I claim GST on a chattel mortgage?

The GST position differs from a lease because the business takes title at purchase, but whether and when you can claim depends on your GST registration, your accounting method and the business use proportion. That is a question for your accountant or a registered tax agent. We arrange the finance and explain the structure; we do not give tax advice.

Can I use a chattel mortgage for a car used partly for private trips?

A chattel mortgage is a commercial contract and the asset needs to be predominantly for business use. Some private use is normal and lenders deal with it constantly. What matters is that the declared predominant purpose is genuine, and that your accountant knows the actual split so the tax treatment is right.

What happens if I sell the asset before the term ends?

You request a payout figure from the financier and settle the loan from the sale proceeds so the security can be discharged and the buyer takes clear title. If the sale price exceeds the payout, the difference is yours. If it falls short, you cover the gap.

Is a chattel mortgage available to sole traders?

Yes, provided the asset is predominantly for business use and there is an ABN. Sole traders are assessed on the individual behind the ABN, so personal credit and property ownership carry more weight than they would for a larger entity. Low doc options exist where financials are not yet finalised.

Can I pay a chattel mortgage out early?

Generally yes. Request a payout figure from the financier, which will set out the balance and any early termination costs under the contract. Those costs vary between financiers, so it is worth asking what applies before you sign rather than discovering it at payout.

Does a chattel mortgage appear on my credit file?

A commercial facility is not reported the same way a consumer loan is, but the application, any director guarantees and the PPSR registration all leave a trail that other lenders can see. Assume any lender assessing you later will find it, because they generally do.

Can I refinance an asset I already own under a chattel mortgage?

Yes. Financing an asset the business already owns outright, sometimes called a sale and leaseback or an asset refinance, releases capital back into the business while you keep using the asset. Age, condition and resale market determine whether a lender will do it and on what terms.

Credentials

Credit Representative 554029
ABN 20 672 801 651
FBAA member
AFCA external dispute resolution

Other ways we can help

Reading

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Where we work

Get the structure right before you sign

Tell us the asset, the price and what you intend to do with it at the end of the term. We will lay out how a chattel mortgage would work for that purchase, and what to put in front of your accountant.

Or call us

1300 015 267

Monday – Friday, 09:00 to 17:30

Head Broker

Speak to Dave Pham

Call 1300 015 267 Info@WeLnd.com.au