Chattel Mortgage

Financing your commercial car or equipment purchase with a chattel mortgage allows your business to spread out the cost over time while still gaining access to tax benefits.

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Chattel Mortgage
Last Updated: 13/05/2025
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A chattel mortgage is a type of loan that allows you to purchase an asset for business purposes. This can include cars, vehicles like vans, buses, trucks and tractors and other specialised commercial equipment. However, motor vehicles are the most common use for these loans.

Why apply for a business loan with Savvy?

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How do chattel mortgages work?

Chattel mortgages work in a very similar way to a standard car loan, with several areas tailored to commercial needs. Here’s how they work:

  • Buy new or used (provided it meets your lender’s criteria)
  • Borrow from $5,001 to 100% of your asset’s value
  • Have your loan secured by your asset (as collateral)
  • Repay your loan over between one and seven years
  • Make payments on a weekly, fortnightly or monthly schedule
  • Repay with interest and fees (some may waive certain fees)
  • Deposits and balloon/residual payments are optional
  • Early repayments may be available with some lenders

Chattel mortgage tax benefits

The biggest difference between chattel mortgages and car loans is their tax benefits. Under a chattel mortgage agreement, you can claim the following:

  • Interest on your loan repayments
  • GST on the purchase of the asset
  • Depreciation of the asset over time

It’s important to note that you’ll only be able to claim for the business portion of each of these expenses. For example, if you’re using your car for business purposes 75% of the time, you can claim up to 75% back on tax. You can only receive the full amount if your asset is used exclusively for commercial purposes.

If you’re unsure how much to claim, you should speak to your accountant or a tax professional. Every business is different, so it’s crucial to get personalised advice before you complete your tax return.

Chattel mortgage interest rates

Commercial loan interest rates are usually higher than secured consumer finance, such as car loans. Lenders set their rates based on a variety of factors specific to you and your business. These can include:

  • Your business’ credit score (and yours): a business with a strong credit record is likely to receive a rate on the lower end of the scale. Your personal score will also be included in the equation.
  • Your personal assets: if you’re asset-backed (meaning you own your home), your business may qualify for a reduced rate.
  • Your business’ revenue and expenses: lenders look at your business’ incomings and outgoings when assessing your application. The more profitable, the better.
  • Your business’ assets and liabilities: any existing commercial assets owned by your business will be factored in, as will outstanding debts like other loans.
  • Your business’ trading history: a relatively new company with only a few months in business will be charged a higher rate than one with an extensive trading history and proven track record.
  • The asset you buy: a car won’t attract the same interest rate as a piece of equipment. Specialised commercial assets usually come with higher rates than road vehicles.

How are chattel mortgages different from leases?

There are several key differences between chattel mortgages and finance or operating leases. Let’s break it down:

Chattel mortgage Commercial lease
Ownership? From the start Optional at the end of the agreement
Tax-deductible payments? Interest only Yes (subject to usage)
Residual included? Optional Mandatory
Options at the end of the agreement? Whatever you like, as you’ll own the asset Buy, sell or trade in the asset or refinance the residual to continue your lease (finance lease)
Hand back the asset to your lessor (operating lease)
Available terms? One to seven years One to five years (up to seven possible if the residual is refinanced)
Ability to use a deposit/trade-in? Yes No

Chattel mortgages vs novated leases

A novated lease is different from a commercial lease. It’s designed for salaried employees buying a car and involves having their lease payments deducted from their pre-tax income (known as salary sacrificing).

The benefit here is that your income tax is reduced, which can save a substantial amount overall. The GST on the purchase of your car can be claimed, while lease providers can access competitive fleet discounts.

Because a salary is required to run a novated lease, you won’t be able to get one if you don’t pay yourself a consistent wage. Although they can be used for commercial purposes, it’s uncommon for this to be the case. All in all, novated leases won’t be the best option for most business owners in this situation.

Chattel mortgages vs hire purchases

Hire purchases are another type of commercial arrangement. This involves a provider purchasing an asset and hiring it out to a business. That business pays for it in instalments and eventually, after the final payment is made, has ownership of the asset transferred to it.

These used to be popular with businesses looking to take advantage of off-balance sheet accounting, as they don’t initially own the asset. However, hire purchases are much less common in today’s market.

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The pros and cons of chattel mortgages

Pros

  • Borrow up to 100% of your asset’s price

    A chattel mortgage allows you to buy your asset without eating into your business’ cash reserves, up to the full purchase price.

  • Own your vehicle or equipment from the start

    Your business will own the asset from the start, so you’ll have more freedom to use it how you like (certain modifications may not be allowed, though).

  • Choose your preferred repayment term

    You can select a term as short as 12 months or one as long as seven years, depending on how much you’re borrowing and your business profile.

  • Enjoy tax benefits

    Perhaps the biggest advantage from a financial perspective is the ability to claim part or all of your loan’s expenses on tax, in addition to GST and depreciation.

  • Add a customisable deposit or residual

    You can pay a deposit upfront, a residual at the end of your term or both to reduce your payments. Unlike leases, chattel mortgage residuals are customisable.

Cons

  • Early repayment fees may apply

    If you decide you want to clear your loan ahead of schedule, you could be slugged with steep early termination fees by your lender.

  • Assets must meet lender requirements

    You can’t just buy any old car or equipment. Because the loan is secured, it’ll need to be accepted by your lender, including falling within its age and condition criteria.

  • Can only be used for a single asset purchase

    Chattel mortgages are designed solely for the purchase of the asset you’re buying. You may be able to include on-road costs like insurance, registration and vehicle duty, though.

How to apply for a chattel mortgage with Savvy

  1. Complete our simple online form

    First and foremost, fill out the short form on our site. This will tell us about you, your business, what asset you’re after and how much you’re looking to borrow.

  2. Submit any required documents and financials

    We may ask for further information about you after you complete your application. This may be to verify your identity, income or your business’ revenue or profitability.

  3. Speak with your Savvy consultant about your finance options

    Once we have all the information we need, we can get to work comparing options on our panel. Your consultant will give you a call to discuss the best deals available.

  4. Lock in the vehicle or equipment you’re after

    If you haven’t already chosen the asset you’re after, now’s the time to do that. If you’re after a car or another road vehicle, our in-house car broker team, Vehicles Direct, can help you find one.

  5. Have your application prepared, sent and approved

    Your consultant will get to work preparing your application for formal submission to the lender. They’ll let you know when it’s been approved and advise you on the next steps.

  6. Sign off and have your asset transferred to your business

    We’ll handle the settlement process on our end. All that’s left for you to do is sign your loan documents and your money can be sent to the vendor, making your business the owner of the asset!

Chattel mortgage FAQs

My business is seasonal. Am I eligible for a chattel mortgage?

Yes – we’re partnered with lenders who can work with businesses that operate seasonally, such as in the agriculture industry. You’ll need to prove that you can manage the loan’s repayments or, in some cases, agree a special payment plan with your lender. Some of these lenders allow you to make quarterly, half-yearly or even yearly payments if you meet their criteria.

If my car is financed with a chattel mortgage, can I drive it for personal use at all?

Yes – chattel mortgages must be used for commercial purposes at least 51% of the time, but the other 49% is up to you. The thing to think about is the more you use it for personal purposes, the less of your loan’s interest and other costs you’ll be able to claim as a tax deduction.

Is insurance included with a chattel mortgage?

Insurance isn’t automatically included in your policy, but we work with lenders who can extend your loan amount to include insurance. Other costs like registration, servicing, motor vehicle duty (if applicable) and even fuel can be covered by your car loan payments, too.

Do all chattel mortgages come with a balloon payment?

No – unlike with leases, chattel mortgages don’t require you to set a balloon payment. You can add one if you agree on something with your lender, but it isn’t mandatory.

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