Learn more about chattel mortgage car finance

Both businesses and individuals may use a chattel mortgage, provided that the car is being used predominantly for business purposes. 

To apply for a chattel mortgage, you need to first consider your options and choose a suitable lender that meets your requirements. Once you have selected a lender, you can apply for the loan online by filling out a form. If the lender doesn’t offer an online application process, you can either call them or visit their nearest branch. 

After you’ve applied, the lender will ask you to supply documents that confirm your identification, income, job profile, etc. If everything is in order, most lenders will arrange the loan’s settlement, so all you need to do is pick up your car!

A chattel mortgage is a mortgage on a movable item. In the case of a car loan, the chattel is the vehicle. The lender maintains a mortgage over the chattel/vehicle until the loan is fully repaid.

A chattel mortgage is usually used to buy an asset - such as a car - for your company for business use. Relatively similar to regular mortgages, a chattel mortgage structure is based on a lender providing you with funds to purchase an asset while registering their security interest on the Personal Property Securities Register (PPSR) for the life of the loan. In this case, the asset is known as the chattel. After the loan has been repaid, you will have full ownership of the asset. 

A popular finance option, a chattel mortgage is usually preferred by self-employed or small business owners, due to flexible options available for repayment. In some cases, you may get 100 per cent of the cost of the asset, which means that no upfront deposit needs to be put down.

However, it’s important to note that a chattel mortgage is not regulated under the National Consumer Credit Protection Act. It’s therefore important to seek advice about the product and fully understand the agreement terms before signing.

A chattel mortgage fee is an amount you’ll pay the lender to procure the funds for a chattel mortgage.

You can use a chattel mortgage to finance vehicles used for your business at least 50 per cent of the time. It’s similar to a secured vehicle loan. The lender will give you the funds required to purchase the vehicle whilst you retain the ownership. The finance company then holds a mortgage on the vehicle, using the car as the security, until you repay the loan amount. At the end of the loan term or once you’ve paid it off, the lender will release the mortgage. Alternatively, you can opt to trade-in or refinance the residual value.

Chattel mortgages are a form of secured car loan for businesses. The lender will set up a mortgage, while you take the car’s ownership. When the mortgage is paid off, you own the car. The borrowed amount is repaid through regular installments over a fixed period of time.

To qualify, you’ll have to meet the following chattel mortgage requirements:

• The car should be used for business purposes at least 51 per cent of the time.
• You must hold a valid Australian Business Number (ABN).
• You must show you can service the loan on time
• Identity proof
• Financial records, such as profit and loss account and balance sheet
• Details of the vehicle you want to buy
• Bank statement for your business

Buying a vehicle with a chattel mortgage can help to reduce your tax burden. The tax benefits you can get from a chattel mortgage include:

• Goods and Services Tax (GST): GST is paid when you buy a new vehicle. You can claim the GST credit for vehicles and other goods or services used for commercial use. The GST paid when you buy the car is claimed as an Input Tax Credit if your business is registered for the GST in your Bank Activity Statement (BAS).
• Interest payments: You can claim the interest paid on your chattel mortgage as a deduction in your annual tax returns.
• Depreciation: The longer you own the vehicle, its value will depreciate, and you can claim this depreciation as a tax deduction.

You should consult an experienced tax professional for more information about chattel mortgage tax benefits.

Some lenders might provide you with an option to terminate your chattel mortgage early by repaying the full amount before the term is over. This way, your overall loan term decreases, therefore reducing the interest you need to pay.

It’s important to note that some lenders might charge a fee for you to pay off your chattel mortgage early. So, if you’re planning to terminate your chattel mortgage early, make sure you check if your lender allows you to do this. You should also determine if there are any additional fees or charges that you would need to pay to do this.

A chattel mortgage is a loan issued to a person or a corporation for movable property. The movable property could include automobiles, yachts or boats, mobile homes, caravans or trailers. The term chattel in chattel mortgage refers to the movable property  used as collateral or security for the loan.

In a chattel mortgage, the loan is backed by 'chattel,' which the lender retains ownership of until the full loan has been repaid. Usually, the interest rate charged on such mortgages is lower. Repayments can also be fixed, which means you know exactly how much you’re repaying each month.

The most significant benefit for the lender is that the properties held as insurance are movable and can be sold easily if the borrower defaults.