What is a Chattel Mortgage?

A Chattel Mortgage is a commercial finance product, whereby a financier covers the cost of a vehicle or motor vehicle, on the basis that the customer will repay the amount in regular installments.

With this type of car finance, ownership resides in the borrower. This is a type of secured finance where the financier takes the vehicle as security for the loan through a Fixed and Floating Charge. At the conclusion of the loan term, any applicable ‘residual’ amount is paid by the customer, at which point the vehicle becomes their sole property.

On the other hand, the customer may opt to “trade in” the vehicle or re-finance the ‘residual’ cost.

What are the advantages of a Chattel Mortgage?

There are a multitude of benefits associated with financing a car with a Chattel Mortgage. These include:
• Flexible loan terms
• Broad range of ‘residual’ value options (dependent on vehicle age/type)
• Optional deposit (to reduce loan size)
• Potential tax deductions *
• Potential Input Tax Credits *
• Chattel Mortgage often features a lower interest rate.
• No ongoing fees (depending on lender)
• Fixed interest rate (depending on lender)
• Structured repayments available (corresponding to business’ cash flow) *Please contact your accountant for taxation advice.

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