A Chattel Mortgage is a business use loan, where the car will be used for more than 50% business use. They can be available for business entities, or employees who use their car s for business purposes.
What Are The Benefits?
If the entity buying the vehicle is GST registered, they can have the ability to claim all the GST on the purchase price as an input tax credit in their next Business Activity Statement. The depreciation on the vehicle is claimable, as is the interest component in the repayments.
Some financiers may provide slightly better interest rates for their business use products, and can at times have lower fees and less stringent assessment criteria, as the loan is not governed under consumer credit legislation.
You could have flexible loan terms and the option of a balloon payment at the end of your loan. Loan terms would usually go up to 5 years, but there are a few financiers that will allow the term to be longer, as loan as there was no balloon payment for loan terms over 5 years.
You can choose how much deposit you want, or you could borrow the full amount, plus any additional items, such as insurances and fees. A vehicle trade in can usually be used as equity to reduce the borrow amount too.
Most Chattel Mortgages will allow you to repay your loan early, but they all have varying ways of how they calculate your payout figure.
Who Would Use One?
Anyone who would use their car for more than 50% business use can apply for a Chattel Mortgage. There are other options available for business use products, but a Chattel Mortgage would appear a very popular choice as the ownership remains that of the borrowers from purchase date and all through the loan period.
The vehicle stays on your balance sheet if your business buys the vehicle, so for those businesses wanting to rent their assets, a Chattel Mortgage would not be suitable to them and you may look at other solutions, such as a Finance Lease.