Chattel Mortgages

A chattel mortgage is a bit like a hybrid car loan, but made especially for business vehicles. The business takes ownership of the vehicle at the time of purchase, while the lender retains an interest in it. From there, your business makes repayments and once it’s paid off you receive full ownership of the vehicle. This guide explains why it’s useful, and the pros and cons of a chattel mortgage compared to a car loan.

IMB New Car Loan

IMB New Car Loan

4.99 % p.a.

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5.34 % p.a.

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• No monthly fees
• No early repayment fees
• Borrow up to $75,000

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IMB New Car Loan

A low rate loan to finance new vehicles or cars up to two years old. Borrow up to $75,000.

• Interest rate: 4.99% p.a.
• Comparison rate: 5.34% p.a.
• Interest rate type: Fixed
• Application fee: $275.12
• Minimum loan amount: $2,000
• Maximum loan amount: $75,000

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Name	Product	Interest Rate (p.a.)	Comparison Rate (p.a.)	Min Loan Amount	Loan Term	Application Fee	Monthly Service Fee	Monthly Repayment
IMB New Car Loan		4.99% (fixed)	5.34%	$2,000	1 to 7 years	$275.12 ($250 Application fee + $25.12 PPS registration fee)	$0		You'll receive a fixed rate of 4.99% p.a. A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one that's up to two years old.	Go to site More Info	Compare	loading Fetching your data...
Latitude Personal Loan (Secured)		From 5.99% (fixed)	7.26%	$3,000	1 to 7 years	Loans under $5000 - $140	$13		You'll receive a fixed rate between 5.99% p.a. and 21.99% p.a. based on your risk profile Lock in a competitive fixed rate when you offer security. Loan can be used for any purpose and repayments are flexible. You can check your interest rate before applying with no impact to your credit score.	Go to site More Info	Compare	loading Fetching your data...
Stratton Finance New Car Loan		From 4.05% (fixed)	5.63%	$10,000	3 to 7 years	$700	$8.25		You'll receive a fixed rate from 4.05% p.a. depending on the lender you are approved with Apply for up to $250,000 and use cash or trade in a vehicle to use as a deposit. Optional balloon payment available.	Go to site More Info	Compare	loading Fetching your data...
Driva Car Loan		From 3.95% (fixed)	5.1%	$2,000	1 to 7 years	$295 (Varies by lender, starting from $295)	$10		You'll receive a fixed rate from 3.95% p.a. Borrow up to $250,000 with loan terms from 1 to 7 years. Get access to a range of lenders.	Go to site More Info	Compare	loading Fetching your data...
Credit Concierge Car Loan		From 3.99% (fixed)	5.08%	$10,000	1 to 7 years	$350	$8.50		You'll receive a fixed rate of 3.99% p.a. with a comparison rate of 5.08% p.a. Get access to over 20 providers to fund a new or used car.	Go to site More Info	Compare	loading Fetching your data...
Symple Loans Personal Loan		From 5.75% (variable)	6.47%	$5,000	1 to 7 years	from 0% to 5% of the loan amount	$10		You'll receive a personalised interest rate from 5.75% p.a. to 25.99% p.a. based on your risk profile Borrow up to $50,000 to pay for what you need.	Go to site More Info	Compare	loading Fetching your data...
NAB Personal Loan Unsecured Fixed		From 9.99% (fixed)	10.88%	$5,000	1 to 7 years	$150	$10		You'll receive a fixed rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% (13.56% comparison rate) or less. See Comparison rate warning in (i) above.	Go to site More Info	Compare	loading Fetching your data...

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What is a chattel mortgage?

A chattel mortgage is like a secured car loan designed specifically for vehicles that are at least 50% business-use. The main benefit is that it’s a bit more flexible than typical consumer car loans, which may let you access some more favourable rates and other useful terms. The downside is that it’s not as strictly regulated, and is a lot more “buyer beware” than consumer loans.

How does a chattel mortgage work?

It can vary, depending on the terms of the individual contract, but generally:

• The lender gives you money to buy a vehicle.
• You take ownership of the vehicle immediately while the lender retains a registered interest in it.
• Once you finish paying off your chattel mortgage, the lender no longer has an interest in the vehicle.

Typically, you can adjust almost any terms and conditions of a chattel mortgage, with a few exceptions. The main one is that it will always be a secured loan, with the vehicle itself as collateral.

What are the benefits of a chattel mortgage?

The main advantage of chattel mortgages is that they aren’t as strictly regulated as other car loans. Someone with poor credit might use it to buy essential business equipment more easily, while someone else might specifically tailor the loan terms for more tax benefits, or other things that are not available with standard loans.

For example, someone might negotiate a chattel mortgage to include a large initial deposit, so that more can be written off as a tax deduction that year. Meanwhile, someone else might simply use a chattel mortgage to get a lower interest rate than mainstream lenders are offering.

Or, people who need an essential business vehicle, and expect it to increase their income, might want try for a chattel mortgage that allows early repayments.

Generally, a chattel mortgage can offer a lot of benefits for someone who knows what they want, and knows what they’re doing. However, it is not as heavily regulated as standard car loans, so you need to be absolutely certain you understand all the terms and conditions before signing up.

Tax benefits of a chattel mortgage

None of the following information should be construed as tax advice, or even a suggestion. It’s simply to give you an idea of the potential opportunities offers by chattel mortgages. Everyone’s situation is different and the following information might not be applicable to your needs. You may want to consult a tax adviser or accountant before taking any action.

One of the main features of chattel mortgages, compared to something like a lease agreement, is that you become the owner of the car right away.

With a lease, you are simply paying to use the vehicle, however with a chattel mortgage you are “buying the car yourself” but just happen to be using someone else’s money, which you obtained under a separate contract. This has tax implications. Take a look at the case study below to see an illustrative example of these implications.

Other types of business car loans

Some of the other types of business car loans include:

• Commercial hire purchase. With this type of loan, a company leases or hires a car for a certain time frame, and pays a fixed monthly payment towards the car’s use.
• Finance lease. This type of car loan lets a business use a car as a commercial vehicle and enjoy car ownership, while in fact the lending company owns the car.
• Novated lease. This type isn’t technically a form of business car loan, but more a salary sacrificing method for employees. This is best for tax shelter purposes for both the employer and the employees.

A chattel mortgage is a type of loan for buying a vehicle for the purpose of using it mainly for business operations. The set-up lets you own the vehicle while the lender takes over the vehicle as security.

The flexible terms and potentially competitive rates mean it can be a suitable option for a lot of businesses, but it’s always important to make sure you fully understand the terms and conditions of any loan.