What is the difference between chattel mortgage and hire purchase

With the right advice, you'll be matched to a business car loan that will maximise the potential of your working capital. Tom Caesar is the Managing Director of The Positive Group, a group of Australian financial services companies offering a broad range of finance to clients Australia wide.

Tom regularly contributes articles on car finance, insurance, technology and business growth, drawing on his experience of starting his own brokerage in We can deliver articles like this one straight to your inbox. Simply enter your email address in the box below and we'll take care of bringing you the best content. Toggle navigation Positive Lending Solutions. Our car finance specialists will find the best car loan for your lifestyle.

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We Say Yes! Resources 35 Years finance experience in one place. Quick Quote Hire Purchase or Chattel Mortgage? Filed under Information Centre. April 10, Hire purchase or chattel mortgage? Here's now each finance option works: Chattel mortgage A chattel mortgage is essentially a secured car loan, tailored specifically for business use. Tax with a chattel mortgage Taking full ownership of the vehicle means that you'll be able to claim the full input tax credit in your next BAS statement, immediately claiming back GST on the purchase, as long as your business is registered for GST.

You can also claim for depreciation, running costs, and interest on the loan. Record-keeping requirements To show that you're using the vehicle for business purposes you will need to keep a logbook for twelve weeks to demonstrate the tax-deductible portion of the vehicle use. Balloon payment and loan term A chattel mortgage has a fixed loan term and usually has a balloon payment that falls due at the end of the loan term.

You may also be able to claim interest and depreciation costs, depending on how much you use your car or equipment for business use. The best possible finance package comes down to negotiating both the cost of the vehicle or equipment and the finance charges.

Saving money on financing business equipment can often come down to the amount you are financing and total repayments, not necessarily the cheapest interest rate. Make sure you consider both of these as separate items when comparing your options. Calculate now. The information on this page is for general information purposes only and has been prepared without considering your objectives, financial situation or needs.

You should, before acting on the information, consider its appropriateness to your circumstances. Fees, charges and conditions may apply. Full terms and conditions will be provided with any agreement upon credit approval. Taxation considerations are general and based on present taxation laws and may be subject to change.

You should seek independent, professional tax advice before making any decision based on this information. To do so, your business will need to be registered for GST on a cash basis — i. To learn more about how chattel mortgage GST benefits work, you can read our dedicated Chattel Mortgage guide. There are two main types of business lease in Australia: a finance lease, and an operating lease.

The main advantage of a finance lease is low interest rates in comparison to other types of equipment finance. Your business will have both the use of business equipment and the benefits of ownership, while the lender will have actual ownership of the asset, which means there is very low risk to the lender.

You may also be able to claim tax on your finance lease payments. The main benefit of an operating lease is that your business can commonly upgrade the assets purchased within the lease period. This is highly beneficial for businesses purchasing IT equipment, as these types of assets often become obsolete within a few years. Your business can also claim tax on your rental payments. The main benefit of a commercial hire purchase is that your business will own the asset at the end of your agreement.

Your business will benefit from not needing to purchase the asset outright, which frees up cash flow on medium-value assets such as office furniture or power tools. For this reason, hospitality businesses often use hire purchase agreements to finance commercial kitchen equipment. A cash basis means your business records expenses and income as they occur — this allows you to claim back the initial purchase-price GST on your next business activity statement BAS.

The differences between a chattel mortgage, lease, and a hire purchase agreement are levels of asset ownership for the business and varying degrees of tax benefits. While all of these types of business finance are used to purchase equipment, vehicles, and machinery, understanding their differences could save you money and provide access to vital business cash flow.

A chattel mortgage, lease, and hire purchase are all available from a variety of lenders in Australia — including banks, non-bank lenders, and specialist asset finance lenders. You can read about where to apply and how to qualify in our equipment finance guide.