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Tags: Leasing

How does a Chattel Mortgage work?

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

How does a Chattel Mortgage work?

  • The financier will advance funds to the customer for a vehicle purchase, at which point the borrower takes immediate ownership of the vehicle. As security for the loan, the financier takes a ‘mortgage’ on the vehicle by registering their interest with the PPSR.
  • Once the terms of the contract are met, the financier’s security interest is lifted and the customer has clear title to the vehicle.

Benefits of a Chattel Mortgage995862_10152313551052275_1805359277_n

  • Chattel mortgages have flexible contract terms that range from 12-60 months. Borrowers can also apply a residual value to the contract, allowing monthly repayments to be lowered to fit tighter budgets.
  • Chattel mortgages also come with fixed interest rates, meaning the monthly repayments are also a fixed amount and you will know your monthly costs for the term of the contract in advance. You are also able to use a deposit (cash or trade-in) to secure the loan. These interest rates are also lowered as the finance is secured against your new vehicle.
  • If your vehicle is being used for business purposes, a tax deduction is available on chattel mortgages, and if you are registered for GST you can claim the GST contained in the vehicle as input credit on your next Business Activity Statement (BAS). However, there is no GST charged on the monthly repayments or residual value of the loan.

Who does a Chattel Mortgage suit?

  • Chattel mortgages suit companies, partnerships, and sole traders who use a cash method of accounting. That is, they record business income and expenses as they occur. This allows them to read more…