K R Consulting

Chattel Mortgage

Purpose: As an alternative to leasing or hire purchase, a Chattel Mortgage or Bill of Sales arrangement is a fixed interest rate loan with security provided by a mortgage over the relevant equipment/vehicle etc. This solution is particularly favorable for those businesses that wish to retain the equipment at the end of the term and account for GST on a cash basis. A Chattel Mortgage, unlike a lease or Hire Purchase Agreement, gives you immediate ownership of the asset from the beginning of the loan. Apart from mortgage stamp duty, the contract or repayments do not attracts or stamp duty.

Term: The term of finance agreement can be from 1 - 5 years.

Deposits: Deposits are optional. You may, however, choose to trade in an old vehicle or put in a deposit to reduce the amount to be financed, thereby reducing your monthly payments.

Residual/Balloon: You can choose to have a balloon payment as the last payment of your finance agreement, but it also can be the first month’s payment. This balloon payment is between 10% - 40% of the cost price. A balloon payment allows for lower monthly payments and leaves you with more working capital to run your business.

Ownership: Ownership remains with you throughout the term of the loan. Similarly to a consumer loan however, the vehicle is mortgaged to the finance company. The mortgage is discharged after the final payment has been made and you retain the equipment.

Accounting Benefits: You can elect to pay the GST portion of the invoice price from working capital or fund it as part of the loan amount (the loan can be structured so that when the income tax credit is received, from your next BAS lodgment, it is repaid off the loan to reduce the debt). The interest components of all repayments are fully tax deductible provided goods are used100% for business purposes. The depreciation on the goods is fully tax-deductible.

A Chattel Mortgage attracts added upfront fees and varies between the different finance companies.

The Auto finance market is very competitive. If you have any questions that we can help you with, please call at any time on 130079 63 69 or click on the Make an Obligation Free Enquiry link below and one of our experienced consultants will be in touch with you within 24 hours.