What is a Chattel Mortgage?

September 02, 2013
Ian Robinson

A Chattel Mortgage is a Commercial Finance product where the client takes ownership of the vehicle (Chattel) atthe time of purchase.

How does it work?

When the funds are advanced the financier takes a mortgage over the vehicle 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 client fukll unencumbered ownership to the vehicle.



Flexible terms from 2 to 5 years.

A balloon can be added to the contract if desired, leaving a residual payment at the end therefore tailoring payments to be cheaper if required. 

Fixed interest rates.

Monthly payments are fixed.

Costs are known in advance.

A deposit or trade is able to be used if required.

A tax deduction is available when a vehicle is used for more than 50% business purposes.

A customer who is registered for GST can claim the GST contained in the purchase price as an input credit on their next BAS.

No GST is sharged on the monthly payment or balloon amount.

Interest rates are lower because the contract is secured against the vehicle.


A Chattel Mortgage is suitable for those individuals, Partnerships or Companies who use the cash method of accounting (they recors business income and expenses as and when they occur) as it allows them to clain the GST in the vehicle's price upfront.


GST is charged on the purchase price of the vehicle but not the monthly rental or the contract balloon.

Where the customer is registered for GST they can claim some or all of the GST contained in the vehicle purchase price on their next BAS rather than spread it over the term of the loan.

Under a Chattel Mortgage the customer can claim interest charges and depreciation (up to the depreciation limit) as a tax deduction.


Posted in: Car loans & leasing

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