What’s the difference between a commercial hire purchase and a chattel mortgage?

A commercial hire purchase allows your business to hire and use a vehicle while making fixed monthly repayments, with ownership transferring to you once the final payment is made. A chattel mortgage, on the other hand, means your business owns the vehicle from the start, using it as security for the loan. Both options can offer potential tax benefits, but they differ in terms of ownership and accounting treatment.

Can I get a commercial hire purchase if I'm self-employed?

Yes. Self-employed individuals, sole traders and ABN holders can usually apply for a commercial hire purchase. You’ll just need to provide evidence of business income, such as bank statements, tax returns or BAS statements, to show you can meet the repayment requirements.

How long can I finance a vehicle under a hire purchase agreement?

Typical commercial hire purchase terms range from 1 to 5 years, although some lenders may allow longer terms depending on the vehicle type and your business’s financial position. Choosing a longer term can lower your monthly repayments, but you’ll generally pay more interest over time.

Can I claim GST on a commercial hire purchase?

In most cases, you can claim an input tax credit for the GST on the purchase price of the vehicle at the start of the agreement, provided your business is registered for GST. Always confirm your eligibility with your accountant or the ATO before claiming.

Can I pay off a commercial hire purchase early?

Yes, most lenders let you make early repayments or pay out your agreement before the end of the term. However, you may be charged an early termination or break fee, so check the contract carefully before deciding to settle early.

What happens at the end of a commercial hire purchase?

Once you’ve made all your repayments, ownership of the vehicle transfers to you. This process is usually automatic after the final payment, meaning you’ll then own the car outright with no further obligations to the lender.

Can I get a commercial hire purchase for used vehicles?

Yes, many lenders offer hire purchase agreements for both new and used commercial vehicles. The vehicle’s age, condition and value will affect how much you can borrow and the interest rate you’ll be offered.

Commercial hire purchase agreements & contracts

A commercial hire purchase (CHP) agreement is a type of vehicle finance where the financier buys the car on your behalf and hires it back to you over a set period of time.
You make repayments towards the vehicle and can drive it, but don't own it until the end of the agreement (when you have repaid the full amount).
Commercial hire purchases could be a good loan option for business owners who want a new vehicle (or vehicles) but also need some financial flexibility.

How does a commercial hire purchase car loan work?

As the name suggests, this is a commercial financial product for businesses. This includes sole traders, partnerships and companies.

Due to the nature of the loan, it is also referred to as a "corporate hire purchase" or "offer to hire". During the loan term, the borrower is not the owner of the car and although they have use of the car, it is only transferred to their ownership when they finish making payments. That is after the total price of the vehicle has been repaid, including any interest charges.

This is a flexible loan contract and one that is usually placed on a fixed interest rate. The borrower is able to identify the real cost of the car since monthly repayments are fixed. Some lenders will require a deposit or down payment, while in other cases trade-ins may be used.

Pros and cons

Pros

Tax deductions. You can claim depreciation and interest charges on the contract. If you use the vehicle for business, you may also be able to claim GST credits.
Flexible repayments. Commercial hire purchase contracts may range from 1 to 5 years, which means you can choose a term that suits your finances. You may also have the option of balloon payments to help manage your loan according to your cash flow.
Automatic ownership upon repayment. The vehicle is automatically transferred to the hirer for ownership upon completion of payment.

Cons

You don't own the car. During the commercial hire purchase agreement period, you are the hirer and not the owner of the car. So defaulting on repayments may cost you the car.
It can be expensive. Commercial hire purchase agreements may be more expensive than commercial car loans or other more popular car finance options. The minimum loan amount may also be higher.
Lower vehicle value when you own it. The value of a vehicle depreciates from the time it is purchased, so at the end of the hire purchase agreement the car will be worth less than when you first started driving it.

How to compare commercial hire purchase vehicle loans

Interest rates
You need to compare the interest rates with any loan you take out. Different lenders will offer different rates and this contributes to the overall cost of the loan.
Repayment flexibility
Hire purchase loans are normally repaid with fixed monthly payments. You need to find out how flexible the lender will be when it comes to your repayments and whether you will be allowed to adjust your monthly payments.
Loan features
Not all lenders require down payments and some will be willing to take a trade-in as your deposit. Compare the loan features that different lenders offer and evaluate them to find one that is most suitable for your needs.
Fees
What are the fees you would be looking at with different lenders? Note that you will not be charged GST on your monthly or residual payment.

What to watch out for

Defaulting. Remember that you do not own the car, so the implications of defaulting on payments may cost you all the other payments you’ve made. If you keep defaulting on payments, the financier may decide to take back their car.
High debt. Again, you don’t own the car until you fully settle the loan amount and interest. It’s therefore important to make smart financial decisions when it comes to the choice of car. The choice is yours and you might want to consider going for a car that is well within your budget. You need a loan that is manageable.

How to apply for a commercial hire purchase car loan

Companies, partnerships, sole traders and individuals are all eligible for commercial hire purchase car loans. However, the car needs to be for business use or income purposes. Before you can apply for a commercial hire purchase car loan, it’s recommended that you use the comparison table on this page to compare what different lenders are offering. You can click on the lender’s link to access their website for more information.

You can choose to apply for the loan online, which is convenient, or physically at the lender’s offices. With both application methods, the lender will require that you fill out an application form and supply personal and financial details.

Use our Hire Purchase Calculator

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We don't compare commercial hire purchase agreements. The table below shows a range of business loans you can compare to decide what type of finance suits your business's needs, or you can compare car loans.

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8.2 Great Valiant Finance Business Terms Loans	8.2 Great	$5,000	$500,000	3 months to 3 years	Variable, starting from $0		Enquire now View details Compare product selectionCompare	loading
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A commercial hire purchase allows your business to hire and use a vehicle while making fixed monthly repayments, with ownership transferring to you once the final payment is made. A chattel mortgage, on the other hand, means your business owns the vehicle from the start, using it as security for the loan. Both options can offer potential tax benefits, but they differ in terms of ownership and accounting treatment.

Finder writers are subject matter experts and use primary sources, in-depth research and interviews with other experts to ensure you're getting accurate, up-to-date information. Articles are fact checked in line with our editorial guidelines.
1. Australian Taxation Office (ATO) - GST - Hire Purchase and Leasing
2. Business.gov.au

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Matt Corke is Finder’s head of publishing ventures. Prior to this he was head of publishing for Australia, New Zealand and emerging markets. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates. See full bio

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Commercial Hire Purchase Agreements

Commercial hire purchases allow you to get a vehicle you want on a repayment schedule that you can afford, without actually owning it.

Key takeaways