Chattel mortgage: own the vehicle or equipment from day one and pay it off over time

A chattel mortgage is the most common way Australian businesses buy a ute, van, truck or piece of machinery on finance. The idea is simple: the lender pays for the asset, your business owns it straight away, and the lender holds a mortgage over that asset until the loan is paid off. When the last repayment clears, the security comes off and the asset is yours without strings.

It’s a structure, not a type of asset. The same chattel mortgage can sit behind a vehicle finance deal, a truck purchase or general equipment finance. This page focuses on how the structure itself works and when it’s the right choice.

How does a chattel mortgage work, step by step?

1. You choose the asset from a dealer, supplier or private seller.
2. The lender assesses your business and the asset: its age, type, price and how easily it could be resold.
3. You decide on a deposit and balloon. Both are optional; both change the repayments.
4. At settlement the lender pays the seller and registers a security interest on the Personal Property Securities Register (PPSR). Registration is how a lender protects its position if a borrower can’t pay or becomes insolvent, a point the PPSR’s own guidance makes clearly for financiers and lessors.
5. You make fixed repayments over the agreed term, often monthly.
6. At the end you pay any balloon, the lender discharges its interest, and the asset is free and clear.

Throughout the term, the asset appears on your balance sheet as yours, with the loan shown as a liability.

Who is a chattel mortgage best suited to?

A chattel mortgage tends to suit a business that:

• wants to own the asset and possibly modify it (a tradie fitting out a ute, for example);
• expects to keep it for most of its working life;
• uses it mainly for business purposes;
• is registered for GST and would benefit from claiming the credit on the purchase;
• prefers fixed, predictable repayments.

It’s less suited to businesses that upgrade every couple of years, or that would rather keep assets and debt off the balance sheet. For those, a finance or operating lease is often the better tool.

Chattel mortgage vs lease vs hire purchase

Feature	Chattel mortgage	Finance lease	Hire purchase
Owner during the term	Your business	The financier	The financier
Ownership passes	At settlement	Only if you buy at the end	On the final payment
GST on purchase price	Generally claimed as a credit up front	Claimed on each lease payment	Depends on the agreement date and basis
End of term	Pay any balloon, asset is yours	Pay residual, return or re-lease	Final instalment transfers title
On your balance sheet	Asset and loan	Depends on accounting treatment	Asset and liability

Hire purchase is less common in business lending now, partly because the ATO’s GST rules for hire purchase and leasing treat agreements entered from 1 July 2012 differently from older ones. The chattel mortgage gives a similar end result with ownership from the outset.

How does GST work on a chattel mortgage?

Because your business buys the asset, the GST is in the purchase price and a GST-registered business can generally claim it as a credit on its BAS, to the extent the asset is used for business. For cars there’s a cap: the ATO explains that when a car’s price exceeds the car limit, the maximum GST credit is one-eleventh of that limit. The ATO’s motor vehicle purchase guidance sets the 2026-27 car limit at $69,883. Some heavier commercial vehicles fall outside the tax definition of a car, so whether the cap applies to your ute, van or truck is a question for your accountant before you settle.

For income tax, the owner claims depreciation and the interest on the loan. Small businesses with aggregated turnover under $10 million may be able to use the instant asset write-off on eligible assets costing less than $20,000.

Comparing structures for a specific purchase? Tell us what you’re buying and we’ll tell you which one fits.

What does a chattel mortgage cost?

No two deals are priced the same, because lenders set pricing on your circumstances. What shifts it:

• The asset. New, mainstream vehicles and machinery are cheaper to finance than old, specialised or hard-to-resell items.
• Your business. Time in business, credit history, existing debts and banked turnover all count.
• Deposit. Putting money down reduces the amount financed and the lender’s risk.
• Balloon. A balloon lowers regular repayments but means a larger amount at the end, and you pay interest on the balloon portion for the whole term.
• Fees. Establishment, documentation, PPSR registration and early payout fees. Ask for the full list.

Bad credit and ATO debt don’t rule a chattel mortgage out; they’re considered case by case.

Illustrative example

Illustrative example: A plumbing business with three years of trading needs a new dual-cab ute with a canopy, racks and a drawer system, totalling $78k. The owner wants to keep the vehicle for at least six years and fit it out to suit the work. A chattel mortgage over five years with a modest balloon keeps repayments comfortable, the business claims the GST in its next BAS, and the fit-out stays with a vehicle the business owns outright from the first day.

What are the common mistakes?

• Setting a balloon you can’t pay. Plan how the balloon will be cleared before you sign.
• Ignoring business-use percentage. Mixed personal use affects GST credits and deductions.
• Not searching the PPSR on a private sale. Buying a vehicle with someone else’s finance still registered against it causes real problems.
• Financing longer than you’ll keep it. Trading in early can leave you owing more than it’s worth.
• Forgetting insurance. Lenders normally require comprehensive cover on the asset for the life of the loan, so price it in before you commit to the repayment.

Thinking about a chattel mortgage for your next purchase?

If ownership from day one sounds right for your business, the next step is quick. Our enquiry form takes around 60 seconds and there’s no credit check when you send it. We don’t pass your details to a queue of lenders who’ll all ring at once; one real person reviews what you’re buying and how your business trades, then calls you with options. Accurate answers on the form, especially turnover, the asset and its price, help us get it right on the first go.

Check if you qualify for a chattel mortgage →