Chattel Mortgages & What You Need To Know!
A Chattel Mortgage is a commercial finance product where the customer takes ownership of the vehicle (chattel) at the time of purchase.
How does a Chattel Mortgage Work?
Under a Chattel Mortgage, the financier advances funds to the customer to purchase a vehicle, and the customer takes ownership of the vehicle (chattel) at the time of purchase. The financier then takes a “mortgage” over the vehicle as security for the loan, by registering their interest over it with the PPSR (personal properties security register). Once the contract is completed, the security interest is removed giving the customer clear title to the vehicle
Benefits of a Chattel Mortgage
- Flexible contract terms ranging from 1 to 5 years
- A balloon value can be applied to the contract enabling the monthly repayments to be tailored to your budget
- Fixed interest rates for the loan term
- Monthly repayments are also fixed
- Costs are known in advance
- Deposit (either cash or trade-in) may be used
- A tax deduction is available when the vehicle is used for business purposes
- A customer who is registered for GST can claim the GST contained in the vehicle price upfront as an input credit on their next Business Activity Statement (BAS)
- No GST is charged on the monthly repayment or the contract balloon amount
- The finance is secured against the vehicle, providing lower interest rates
Who does a Chattel Mortgage suit?
A Chattel Mortgage is suitable for those companies, partnerships and sole traders who use the cash method of accounting (they record business income and expenses as and when they occur) as it allows them to claim the GST in the vehicle’s price up-front.
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