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Chattel mortgage is a type of finance used for purchasing vehicles and equipment. Under a chattel mortgage, a financing and leasing company will provide the customer with funds in order to purchase the vehicle or equipment (the “chattel”), the customer will make regular repayments and takes ownership of the vehicle at the time of purchase. The financier retains title until final payment is made and takes a “mortgage” over the vehicle. Once the term of the loan is complete and any residual paid the financier removes the Charge, giving the customer clear title to the car. 

Chattel mortgage is perfect for companies, SME’s, partnerships, self-employed and sole traders in Australia who use the cash method of accounting. An article from All Things Finance cited a couple of reasons why:

1. Depreciation and interest are tax deductible

It’s inevitable: cars lose value over time. The advantage of a chattel mortgage over a consumer car loan is that you can claim depreciation and interest as tax deductions.

Tax deductions may also be available if you use the car for business purposes. Input Tax Credits may be available if you’re registered for GST.

2. Lower interest rates

Since the vehicle secures the loan, this allows for lower interest rates in comparison to unsecured commercial car loans.

This is because the finance is secured against the vehicle. Compared to commercial car loans, chattel mortgage rates are also more flexible when it comes to loan terms. Another benefit is that if a vehicle is used for business purposes, a tax deduction can be made. Also, a residual value (balloon) can be applied to the contract for a tailored budget of monthly repayments.

Still another advantage is that when a customer is registered by a Melbourne car leasing company for the Goods and Services Tax (GST), he or she can claim the GST contained in the vehicle price and be input as credit on the Business Activity Statement. No GST is t charged on monthly repayment or the residual value. 

Chattel Mortgage is only one of the many finance options you can choose from in order to acquire the necessities for your business. Other options are Commercial Hire Purchase, Fleet Leasing and Management, Finance Lease, and Fully Maintained Operating lease.

Find out how finance options like chattel mortgage can help you improve your business by contacting Credit Group Australia Pty Ltd.

(Source: Top 5 Benefits of Taking a Chattel Mortgage over a Consumer Car Loan, All Things Finance)

Published Date:

Published By: Jason Viper

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