A Chattel Mortgage is a particular type of finance used by businesses for the purpose of purchasing a new or used vehicle or other business equipment.
Chattel Mortgage is essentially a Mortgage over goods to be financed. Chattel Mortgage is classed as a cash sale in that the goods automatically become yours on purchase and the finance company takes a mortgage over the chattels. However for tax purposes you can claim depreciation, running costs and interest paid, against your business income. The Chattel Mortgage allows businesses to claim the full input tax credit from GST incurred expenses immediately (next BAS statement). Always seek advice from your accountant in regard to this.
The Chattel mortgage is a very flexible finance option, in that, you have the ability to either finance the full purchase price or alternatively, you can include an upfront deposit or trade-in to reduce your rental commitment, while a Residual payment may also be placed at the end of the term (much like a lease residual) to represent the vehicles end value. Alternatively, you may choose to structure your rentals to clear the debt in full over the term of your agreement (fully amortised).
- Interest charged and depreciation of the vehicle are tax deductible
- No capital outlay is required and cash-flow is protected
- Terms can be flexible and fixed repayments make for easy future budgeting
- You have the option to make payments with or without a balloon payment at the end of the term.