What is a chattel lease

what is a chattel lease

Chattel Mortgage

A Chattel Mortgage is a particular type of finance used by businesses for the purpose of purchasing a new or used vehicle or other business equipment.

Chattel Mortgage is essentially a Mortgage over goods to be financed. Chattel Mortgage is classed as a cash sale in that the goods automatically become yours on purchase and the finance company takes a mortgage over the chattels. However for tax purposes you can claim depreciation, running costs and interest paid, against your business income. The chattel Mortgage allows businesses to claim a full input tax credit from GST incurred expenses immediately (next BAS statement). Always seek advice from your accountant in regard to this.

The Chattel Mortgage is a very flexible finance option, in that, you have the ability to either finance the full purchase price or alternatively, you can include an upfront deposit or trade-in to reduce our rental commitment, while a Residual payment may also be placed at the end of the term (much like a lease residual) to represent the vehicles end value. Alternatively, you may choose to structure your rentals to clear the debt in full over the term of your agreement (fully amortised).

Chattel Mortgage - Benefits

  • Interest charged and depreciation of the vehicle are tax deductible
  • No capital outlay is required and cash flow protected
  • Terms can be flexible and fixed repayments make for easy future budgeting
  • After full payment of the chattel mortgage agreement, ownership of the goods is transferred to you
  • You have the option to make payments with or without a balloon payment at the end of the term.

Hire Purchase vs Chattel Mortgage

  • Under the Chattel Mortgage, the purchaser takes title from the time of purchase. The purchaser (the borrower) finances the purchase price (or part thereof) of the chattel by way of a loan, obtained from a lender, and applies the borrowed funds as payments to the supplier for the chattel.
  • A hire purchase agreement is a contract for the hire of goods where the title in the goods remains with the financier and does not pass to the purchaser until either the option to purchase is exercised by the purchaser, or the final instalment is paid. This is a fundamental difference between a chattel mortgage arrangement and a hire purchase agreement.
  • When will an entitlement to an input tax credit arise for a purchaser in relation to the acquisition of a chattel mortgage?
  • Where the purchaser accounts for GST on a non-cash basis and the chattel purchased is a creditable acquisition the purchaser is entitled to the entire input tax credit in the tax period in which the invoice was received or any payment is made, whichever is the earlier. This is similar to that under a hire purchase agreement.
  • If the purchaser accounts for GST on a cash basis and the chattel purchased is a creditable acquisition, the purchaser is entitled to the entire input tax credit in the tax period in which the purchaser applies the borrowed funds to make full payment of the chattel at the time of acquisition.

Personal Loan

A Personal loan gives you more financial freedom, ensuring you keep your own funds free for other purposes.

How does it work?

  • Choose the perfect new or used car for your needs
  • Choose your most suitable repayment period between 24 and 60 months.
  • Decide whether you want a lump sum payment
  • You agree on a deposit and monthly repayments to suit your budget

At the end of the contract, decide if you would like to pay the final lump sum payment to own your car outright, refinance this amount, or maybe even trade in for a new vehicle.

What are the


  • At the end of the agreement (including any final payments) you own your car with nothing further to pay.
  • You have the option of including the on road charges if you wish
  • Fixed monthly payments help with your budgeting.
  • Flexible contract structured to suit your needs
  • Advantages for Business Users
  • Direct Debit available

Leasing Finance

Leasing can be the most convenient way for a large or small business and professionals to obtain vehicles, plant and machinery, office equipment and fixtures and fittings. It is an easy way of obtaining capital equipment without tying up your own funds, as there is no immediate cash outlay. The advantage of leasing occurs in the situations where the use, not the ownership of the asset is the source of value to your business operation. It is a form of finance that can offer substantial advantages, with tax deductable rentals structured to suit your cash flow.

A finance lease is a tax-effective tool to satisfy business needs without tying up capital. Finance Lease payments are made from pre tax income, not after tax profits, enabling a business to preserve cash flow and utilise the capital elsewhere in the business.

Generally, the vehicle itself is the only security required but in some cases where the lessee is a company, a guarantee from the directors or appropriate person may be required.

How does it work?

  • Choose the perfect car for your needs
  • Choose the most suitable hire period usually between 24 and 60 months.
  • Residual value can be varied according to the contract term
  • Agree on your annual mileage.
  • Agree the rentals most suitable for your budget

What are the benefits?

  • In conjunction with a "Deed of Novation" a Finance Lease is an ideal way to salary package a vehicle.
  • Can include "on-road-charges"
  • Can include Comprehensive Motor Insurance Premium
  • Direct debit available

Personal Lease

A Personal Lease opens the advantages of leasing to private customers. A Personal Lease is an ideal option when you use your vehicle wholly or predominantly for personal, household, or domestic purposes.

How does it work?

  • Choose the new car you like.
  • Choose the most suitable hire period usually between 24 and 60 months
  • Residual value
  • Agree the rentals most suitable for your budget

What are the benefits?

  • Flexible contract structured to suit your needs
  • Residual value available to tailor your payments
  • Fixed payments

Novated Leasing

Remuneration packaging is the "Buzz Word" for the nineties and one of the greatest aspects of this is the Novated Lease. A Novated Lease takes over the troubles of providing a company car and gives the employee some surprising benefits.

This is simply an arrangement where the employee leases a car from a finance company then Novated the car (via a Novation Agreement) to the employer who then makes all the lease payments for the duration of employment.

Both the employee and the employer will benefit from this arrangement. The employee can choose any car he wishes, receive fleet discounts, change his car anytime, gain equity in the car and purchase it for the residual. Plus many other benefits.

The employee has his fleet "off balance sheet" which can increase his borrowings ratios, has no more liability of lease payments after the employee leases and substantial saving in employment and administration costs. Plus many more benefits.

Note - as from June 1998 all novation documents must comply with the Australian Taxation Office as a "Full Novation" Be assured that we only use finance companies that fully conform to the ATO ruling and have received notification from the Australian Taxation Office that they indeed comply.

Source: www.saveontax.com.au

Category: Credit

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