CHATTEL MORTGAGE

A chattel mortgage is similar to a mortgage on a property, except that in this case the mortgage is on a moveable item, rather than real property. It is most commonly used for items such as motor vehicles or equipment. We lend you the money for the item you or your business requires, and secure the loan by registering a security interest over the item. When the loan has been fully repaid, you will own the item.

There are a number of benefits associated with a chattel mortgage. Please speak to your accountant to understand how these may apply to you.

WITH OR WITHOUT A DEPOSIT, IT’S UP TO YOU

We are flexible. We can organise a chattel mortgage without a deposit. However, if you would like to pay something upfront, we can organise that option for you as well.

FLEXIBLE OPTIONS AND PAYMENT TERMS

Our lease terms are flexible, and range from 1 to 5 years. Payment terms are designed to suit your business. You can tailor them to suit seasonal cashflow, pay for the goods in full over the term of the contract or even make a balloon payment at the end of the loan.

FEATURES

• Term: 1 to 5 years
• Loan Amount: $10,000 and upwards (subject to credit approval)
• Repayment Frequency: Monthly, quarterly, annually or structured to suit you

HOW DOES A CHATTEL MORTGAGE WORK?

A Chattel Mortgage is a commercial finance product where the customer takes ownership of the asset (chattel) at the time of purchase.

Under a Chattel Mortgage the financier advances funds to the customer to purchase an asset, and the customer takes ownership of the asset (chattel) at the time of purchase.

The financier then takes a “mortgage” over the asset as security for the loan, by registering a Fixed and Floating Charge with ASIC.

Once the contract is completed, the charge is removed giving the customer clear title to the vehicle.

• Flexible contract terms ranging from 24 to 60 months (two to five years)
• A residual value (balloon or final instalment) can be applied to the contract enabling the monthly repayments to be tailored to a budget
• Fixed interest rates
• Monthly repayments are fixed
• Costs are known in advance
• Deposit (either cash or trade-in) may be used
• A tax deduction is available when the asset is used for business purposes
• A customer who is registered for GST can claim the GST contained in the asset price as an input credit on their next Business Activity Statement (BAS)
• No GST is charged on the monthly repayment or the contract balloon amount
• The finance is secured against the asset, allowing lower interest rates

A Chattel Mortgage is suitable for those companies, partnerships and sole traders who use the cash method of accounting (they record business income and expenses as and when they occur) as it allows them to claim the GST in the asset price up-front.

GST is charged in the purchase price of the asset but not the monthly rental or the contract balloon (final instalment).
Where the customer is registered for GST, they can claim some or all of the GST contained in the asset price as soon as they lodge their next BAS, rather than over the term of the loan.

Under a Chattel Mortgage the customer can claim the interest charges on the contract and depreciation (in the case of vehicles up to the depreciation limit*) as a tax deduction.