Chattel Mortgage
Find out more about tax effective and structured chattel mortgage options for your vehicle and equipment.
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Compare chattel mortgages with Savvy
When you’re looking to buy a vehicle or equipment for your business, a chattel mortgage is one of the best options you can look to. With customisable loan terms and repayment options, low rates and fees and multiple tax benefits, chattel mortgages are one of the most popular commercial finance products for sole traders, partnerships and companies, large or small.
Savvy is one of the best places to find and compare the top chattel mortgage offers on the market right now. With over 40 diverse lenders on our panel situated across the country, we give you more options to choose from and help you through the process from start to finish. Everything begins with a simple quick quote and we’ll move your application along from there.
The features and benefits of chattel mortgages
Competitive interest rates
With commercial finance interest amongst the lowest in the market, you can lock in an affordable rate from the outset to help you save across the loan.
Access 100% financing
You’ll be able to borrow up to the full purchase price of your vehicle or equipment, sidestepping the need for an upfront deposit, and can also include on-road costs in your loan.
Repay over one to seven years
As a borrower, you’ll have the flexibility to have your loan repaid in full over as little as 12 months or space out your repayments as long as five to seven years.
Enjoy tax benefits
You can claim the GST on your business purchase, as well as the interest on your payments and depreciation of your asset, on tax as business expenses.
Own your vehicle or equipment from the start
Because you’re the owner of your asset from the outset, you have more of a say in how it’s operated and modified to fit your needs (which isn’t the case for car leases).
Flexible residual values
Also unlike car leases, residual payments are optional and can be shaped to suit your personal requirements, rather than having mandatory minimums set by the ATO.
Early repayment options available
We’re partnered with lenders who can enable you to repay your loan in full prior to its scheduled end date without incurring any fees for doing so.
Choose your repayment cycle
On top of your customisable loan term, you can select whether to make your repayments on a monthly, fortnightly or weekly basis to fit around your income.
Why trust Savvy with your chattel mortgage?
Expert consultants in your corner
Our experienced loan consultants will help you choose the best loan for your needs and ensure your application meets your lender’s criteria.
Over ten years in the industry
We’re one of the most respected brokers in Australia when it comes to vehicle and equipment finance because we understand how to find the best for you.
Personalised interest rates
Each and every applicant will receive an offer and rate based on their personal financial situation, so you can be sure your loan is tailored to your needs.
Chattel mortgages explained further
Purchasing vs. leasing
Leasing vehicles and equipment is the main alternative to buying an asset for business purposes. These don’t involve the transfer of ownership to you until the end of the agreement. Up to 100% of your lease’s payments are tax deductible, plus the GST can be claimed by your financier and passed onto you in savings.
However, because you don’t own the vehicle, you don’t really have much of a say in how you can use it, plus leasing in the long-term can work out to be more expensive than simply buying the asset and paying it off.
Loan security
All chattel mortgages are secured by the asset being purchased. This means that they serve as a safety blanket for the lender in the unlikely event that they’re required to be sold off to cover losses. The significant advantage of security, though, is that it greatly expands your borrowing power and lowers your interest rate.
Unsecured personal loans are available to buy equipment and vehicles, but these are only really advisable if they’re outside your lender’s required age range (which is, in itself, unlikely). Borrowing is capped at $50,000 and rates are higher, but you can also distribute extra funds how you wish.
Fixed or variable interest rates
Because all chattel mortgages come with fixed interest rates, budgeting around your loan repayments each month for business purposes is much simpler and more accurate: your interest and fees stay the same all throughout.
Variable rates are only available on personal loans, which makes them a very rare feature on business purchases. While they could potentially save on interest overall, borrowers generally prioritise the certainty that fixed rates bring.
Comparing chattel mortgages
There are several key features you should always look to compare with your Savvy consultant when assessing your chattel mortgage options, including:
- Interest rates
- Establishment, ongoing and early repayment fees
- Maximum and minimum loan terms
- Maximum and minimum loan amount
How to calculate repayments
Your repayments will be based on multiple factors, such as your loan amount, interest rate, fees and term. Fortunately, you can calculate your ideal loan yourself using our chattel mortgage repayment calculator. This allows you to input all of these factors, plus deposits and residual payments where you see fit. Alternatively, if you’re not exactly sure of the loan you’re after, your Savvy consultant will crunch the numbers for you.
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What is a chattel mortgage and how do they work?
If you’re a business owner or part of one looking for car finance, it’s quite likely you’ve come across a financial product called a chattel mortgage. A chattel mortgage is a loan product built specifically for commercial car purchases – cars used for business 50% of the time or more.
The explainer: chattel mortgage
In the broadest sense, a chattel mortgage is a business car loan comprised of two parts. The chattel, and the mortgage. The chattel is your car – the asset the loan is financing. The mortgage is the loan itself – what you have to pay back. When you purchase a vehicle, the vehicle is effectively yours or your company’s property. What a financier does is place a mortgage on the vehicle, making the vehicle a security against the loan. This gives the financier or lender peace of mind that you’ll pay the loan back. The upside to this is that you will pay less in interest, as security-backed loans generally have lower interest rates. Read more about chattel mortgage features and benefits.
The nitty-gritty
“Mortgages” are officially known as an ASIC-registered “fixed and floating charge.” This grants the lender (chargor) the right to gain control (possession) of the chattel in the event a client defaults (the chargee.) There’s an even more technical explanation, but that’s best left for the lawyers to pore over!
Please note that registration with ASIC does not mean chattel mortgages are subject to the same conditions as the National Consumer Credit Protection Act.
How a chattel mortgage works in practice
A chattel mortgage works much in the same way a commercial loan does – you pay back the loan in instalments on a monthly, fortnightly, weekly or otherwise arranged basis. You can choose to offset your regular repayments with a residual value or “balloon” payment. This is a lump sum set aside at the end of the loan, giving you the option to:
- Trade in your car and start a new loan using the trade-in proceeds to settle your account;
- Pay out the residual and take charge of the car free and clear, or;
- Refinance the residual value.
Why chattel mortgages are better for business
Chattel mortgages differ from consumer car loans because businesses can claim tax benefits – both up front and throughout the life of the loan. Firstly, as the purchase is a cash sale, you can claim the GST on the purchase price. You can also claim the full input tax credit. Over the life of the loan, you can claim the interest paid on your repayments. (Sometimes your lender claims this and passes on the savings to you.) You can also claim the tax breaks on depreciation up to the depreciation limit.
What’s more is lenders may be prepared to finance 100% of the vehicle’s value so you don’t have to spend your own capital or tie up cash flow. You may even be able to finance more than the car’s value to amortise insurance and other extras.
What are the pros and cons of chattel mortgages?
PROS
Own your asset
Operate your vehicle or equipment how you like with (almost) no restrictions on how you can use or modify it over time.
GST is claimable on your purchase
Having GST as a claimable business expense cuts a massive 10% off the purchase price of your asset, likely saving you thousands.
Customisable to your needs
The amount is malleable to fit the cost of your purchase, with terms, fees, repayment frequency and residuals all able to be negotiated in some way.
CONS
Must be used for business purposes
Part of the deal when it comes to a chattel mortgage is guaranteeing that your asset is used at least 50% of the time for business purposes.
All running costs are yours
Any costs relating to the running and maintenance of your vehicle or equipment is yours to arrange and cover; your financier doesn’t organise it for you.
Updating assets is more difficult
If you’re looking to stick with the latest model of car or make of machinery, a chattel mortgage is more difficult and time-consuming to switch out than a lease.
