FAQ

Chattel Mortgage offers borrowers the option to include a balloon. A balloon is a percentage of the purchase price of the vehicle which is deferred for payment at the end of the finance term. A balloon is not included when calculating the monthly repayments.

By including a balloon, the repayments are then reduced. Please note you still pay interest on any balloon amount borrowed. The balloon is represented as a percentage of the purchase price. The exact amount is negotiated by your Jade consultant with the lender. Some lenders will have a maximum balloon.

Strategically, borrowers will be seeking a balloon which reduces the repayments to an amount within their expectations while not exceeding the anticipated value of the vehicle at the end of the loan term. To pay out a balloon, a business can seek to refinance with a new loan or pay the amount from cash funds.

The income tax benefit to a business from a Chattel Mortgage is realised primarily through the depreciation of the vehicle. Only the interest portion of the repayments are tax deductible. At the end of the financial year, the business can depreciate the asset in accordance with the current ATO rulings and that amount is deducted from the taxable income of the business for that tax year.

In regard to GST, the business can claim the full amount of GST which is applicable to the purchase of the motor vehicle on the BAS statement relevant to the time of purchase. Essentially that can be immediately.

Luxury car tax thresholds may apply to the maximum you may claim.

Chattel Mortgage Car Finance is a fairly straightforward type of loan and not dissimilar to the finance concept of a home mortgage. By definition, a mortgage is a debt instrument which can be applied to different types of property or assets.

With a Chattel Mortgage, the lender uses the vehicle as the security against the loan. The vehicle is mortgaged to the lender in a similar way as a home mortgage. The lender extends the funds, uses the car as security and the borrower repays the loan in monthly repayments.

Chattel Mortgage is the most popular form of business vehicle finance in Australia as it suits many business structures that use a cash accounting method.

Chattel is an old term and one that is often used in legal documents. The law has a tendency to use traditional and sometimes very ancient terminology. A chattel refers to goods or possessions or moveable personal property. Property or assets that are not freehold land or fixed such as houses.

In the context of a Chattel Mortgage for a motor vehicle, the Chattel is the vehicle. The lender takes a mortgage over the Chattel. Essentially, the Chattel is the security against the loan.

Some banks and lenders, including the Commonwealth Bank, simply refer to Chattel Mortgage as an Equipment Loan. Despite the old style terminology, the Chattel Mortgage is the most common form of finance for business vehicles.