What is a chattel mortgage?
A Chattel Mortgage is a form of car finance available for sole proprietors, partnerships and companies that use the ‘cash’ method of accounting for the Goods and Services Tax (GST). Under the cash method, the GST component of the acquisition price of the motor vehicle can be claimed back on the next Business Activity Statement, rather than claiming the GST over the term of the finance contract.
Just like a traditional mortgage, the Chattel Mortgage requires some form of security or guarantee to the company you’re borrowing from to ensure the lender that you will pay up the agreed loan amount. Using the vehicle as “chattel” or your guarantee, you are able to put through your request for a loan while the financing company can take out a mortgage to act as the security. In the meanwhile, you can drive the car away and use it as you wish while making payments. When all the payments have been made at the end of the contract, you are own clear title to your car.
Chattel mortgages are loan arrangements that involve the use of movable personal property as the security for the loan, rather than the more common approach of using the actual real estate to secure the loan. In choosing to use movable property as the chattel for the loan, the borrower allows the lender to exercise a lien against the asset or assets that will remain in effect for the duration of the loan. Once the chattel mortgage is repaid in full, the borrower reassumes full control of the chattel. A key factor in the structure for a chattel mortgage is that the assets held as security cannot be permanently tied to any land holdings owned by the borrower. This means that such assets as buildings, or even land that does not currently support any type of building structure, cannot be used as the collateral or chattel for the financial arrangement. All assets that are used for the chattel mortgage must be considered movable or non permanent in nature. Loans created using the chattel mor
Popularity has grown with the Chattel Mortgage because of it’s flexibility and as long as the motor vehicle is being used for business (cash generation), it can offer a great tax deductible as well. The Chattel Mortgage (also known as a Secured Loan or Bill of Sales) is a car leasing agreement suitable for individuals and businesses, big or small. If you run a business through the cash method of accounting, you’ll be able to claim back the GST component on the asset right away. The Chattel Mortgage is different from other car finance arrangements because of the fact that you can claim back the GST on the purchase price of the vehicle as soon as you complete your next BAS statement. This is because the invoice from the dealer is made out to you, so you are able to claim the vehicle tax benefit as the owner. Chattel Mortgage payments are usually paid in advanced with a balloon payment option at the end. The balloon option is entirely up to you and depending on your business cash flow req
Chattel Mortgage is a product that assists a business or an individual to either upgrade or acquire new or used business equipment. A chattel mortgage provides for the purchase of goods in exchange for a fixed series of payments. The goods are used as security for the loan contract. A chattel mortgage allows you to either finance the total purchase price, use a deposit or trade-in or add a final lump sum balloon payment to reduce the loan repayments. As a business, the GST incurred in the purchasing of the equipment can contribute towards paying off the loan! Ask A1 Equipment Finance how this works. With a chattel mortgage, you are deemed to be the owner of the goods while the financier has security over the goods. As the owner, you can claim a tax deduction for the depreciation on the goods as well as the interest component of the loan repayments. Please talk to your accountant to determine what tax and depreciation claims are available to you. Use our FAST QUOTE finance calculator to
