Chattel Mortgage - Business Car Finance
A chattel mortgage is a type of finance that comes in the form of a mortgage on the goods purchased, and are used commonly in Australia for the purpose of private and commercial vehicles and business equipment. It is amongst the most popular type of commercial car loans in Australia.
The way a chattel mortgage works is that the purchaser borrows money from the lender to purchase the vehicle, and the lender then secures the loan with a mortgage on the vehicle. If the purchaser fails to pay, the lender sells the vehicle to recover the debt. It is different from hire purchase in that the borrower has legal ownership of the vehicle on purchaser, and the mortgage is removed once it has been paid up.
They are beneficial for a number of reasons in Australian because:
1. There is no capital outlay involved and the businesses cash flow is not affected.
2. The goods are owned by the purchaser who then pays the mortgage to the lender.
3. Chattel mortgages generally come with the option of a balloon payment.
4. The depreciation of the vehicle or equipment and the interest payments can be tax deductible.
Not only that, but under Australian tax laws, because a chattel mortgage is regarded as a cash transaction, businesses that use a cash basis for accounting for GST can claim the full Input Tax Credit for the GST contained in the price of the vehicle immediately in their next BAS statement.
You are advised to take the advice of your accountant in regard to this, and the vehicle or equipment involved have to be used predominantly for business use to attract these tax benefits. Additionally, some states in Australia apply stamp duty to the repayments, but in spite of this a chattel mortgage is regarded as the best type of business car finance around. It is significantly more popular then an HP deal in which the vehicle does not belong to you until fully paid up.
It is also a popular form of finance in Australia due to the high degree of flexibility it offers. You can either finance the whole price of the commercial vehicle or equipment, or make an initial deposit or trade-in to reduce the mortgage on it. The debt can be fully amortised, although many place a balloon or residual payment at the end of the mortgage term as representing the end value of the vehicle.
The chattel mortgage is also referred to as a Bill of Sale, and is available to individuals as well as businesses, although the tax benefits apply only to commercial car loans. You will generally be given the options of making the repayments either in advance or arrears, and if you feel that this form of finance suites you or your business, then get a quote for your chattel mortgage business car finance here.
Applying for a chattel mortgage is easy, and Finance Ezi makes it even easier for you. We do most of the work for you, including helping with the paperwork. As a broker we make sure that there are no unexpected fees or charges that you are not aware of, and make sure that you get the best deal available.
