September 22, 2017

What is a Chattel Mortgage when Talking about Car Loans

If you’re a business owner in Australia and you are looking around for a great car loan deal, you may have come across the term chattel mortgage. What is it? What makes it different from a typical consumer loan?

Benefits of Chattel Mortgage

It offers flexible contract terms, lower interest rates compared to consumer loans, fixed monthly repayments, and tax deduction.

A chattel mortgage is a commercial car finance product wherein a finance company lets you borrow money to buy a car or vehicle (chattel) that will be used mainly for business, and you’ll make regular payments on the loan (mortgage). It differs from a consumer loan in the sense that the finance company secures the loan with the vehicle that you want to buy. Once you’ve fully paid the loan, you can take ownership and have a clear title of the vehicle and the mortgage will be removed.

A chattel mortgage comes with several benefits. It offers flexible contract terms, lower interest rates compared to consumer loans, fixed monthly repayments, and tax deduction. A residual balloon payment can also be applied so you can have lower monthly repayments.

There are different finance companies that offer chattel mortgage and car loans. Consider these tips to get the best deal:

  • Do your research and compare car loans. With so many things to consider, it is best to look around and see what your options are. Check the car loan rates and other features so you will have an idea of what meets your requirements and financial situation.
  • Use a chattel mortgage or car loan calculator. This gives you an estimate of the amount of your monthly repayments together with the interest. This is a helpful tool for car loan comparison as it gives you an estimate of how much you need to pay based on your preferred term.
  • Seek financial advice. A financial professional can help you better understand the terms related to car loans. It also has taxation implications. Cash basis taxpayers may claim all GST input tax credit up to the depreciation limit related to the purchase of a vehicle under a chattel mortgage facility. On the other hand, monthly repayments or residual amount is not subject to GST.

Do you have other tips on chattel mortgage and car loan comparison in Australia? Share your insights in the comments section below.

About the author  ⁄ Marxa Dillan

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