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Save tax on your business car loan with a chattel mortgage

If you own a business and don’t know what a chattel mortgage is, then the chances are you’re missing out on some serious savings. This convenient method of financing a commercial vehicle offers some incredible benefits, some of which you may be quite surprised by. But before we get down to that, let’s take a quick look at exactly what a chattel mortgage is.

A chattel mortgage is a loan for a commercial vehicle that gives you the buyer ownership of the car from the start of the loan term. What happens is your lender takes a mortgage out over the car and uses that as security for your loan. It sounds a little complicated, but it’s actually quite simple. Once you complete all of your payments, your lender removes the mortgage and hands you the title of the car much like they would in the case of a house loan.

Now not anyone can get a chattel mortgage as it is, in fact, a finance package tailored solely for commercial vehicles. What this means is that you only qualify for this type of loan if you use your car for business more than personal use. That means that over 50% of your car’s time on the road must be business related.

So now we know what it is let’s take a look at some benefits.

One of the major attractions of a chattel mortgage is, of course, those tax savings we mentioned in the title. And as a business owner, you probably understand that any saving on GST and tax is a good saving and this is why this type of business car loan is so popular.

Tax savings include

  • *  No GST on your monthly payment or any residual/balloon payment.

  • *  You can claim the GST on the sticker price of the car as an input tax credit on your Business Activity Statement (BAS).

  • *  You can claim a tax deduction on the loan’s interest charges and the depreciation of the car.

Pretty impressive benefits, wouldn’t you agree?

But that’s not all.

The chattel mortgage is also an incredibly flexible financial product that allows you to choose terms from two to five years. You can also opt to adjust your balloon payment at the end of the term so that it amounts to anywhere from 0-60% of the purchase price of the car. You can even choose how large a deposit to pay at the outset which means that you can set your monthly payments according to your forecasted budget. Check out this handy chattel mortgage calculator for a better understanding of how much you could save on weekly or monthly payments.

But can you believe it, there’s still one more huge benefit to the chattel mortgage that is pretty much guaranteed to have you on the phone to your finance broker tomorrow.

This particular finance package offers lower interest rates than any other. This is because the loan is secured against the vehicle.

Lower interest rates? Yes, that’s a pretty big one alright.

So far we have flexible terms, the ability to set affordable payments, GST and tax savings, and lower interest rates. We’re starting to wonder why all business owners don’t have a chattel mortgage.

In all seriousness though, no two businesses are the same and while this may be an incredible product for one business owner, hire purchase may be a more suitable option for another. So before taking any action be sure to speak to your finance broker or tax advisor about how a chattel mortgage could benefit your business.

As Australia's largest car finance broker, Stratton Finance know a thing or two about loans and finance. With over two decades of experience in the field they are one of the most trusted authorities in the industry.