Chattel mortgage: how it works for cars and equipment

Who offers a chattel mortgage, and on what terms?

Every major bank writes chattel mortgages for business vehicles and equipment, and truck and machinery makers run their own finance arms. The terms below are what each lender publishes, checked between 19 and 30 September 2026. Rates are set for each business and asset, so none is shown; terms change without notice.

How does a chattel mortgage work?

The lender pays the seller, you take delivery as the legal owner, and the lender registers a security interest over the asset on the Personal Property Securities Register (PPSR). You repay principal and interest over the term, often with a balloon at the end. When the final payment is made, the lender removes the registration and you own the asset free and clear. There is no end-of-term decision about ownership, because you owned it all along.

Chattel mortgages cover almost any movable business asset: cars, utes, vans and trucks, trailers, excavators, forklifts, tractors, medical and IT equipment, and commercial kitchen fit-outs. Both new and used assets can be financed, subject to each lender's age limits.

What is the key difference between a mortgage and a chattel mortgage?

What secures it. A home loan mortgage is secured over land and registered against the property's title; a chattel mortgage is secured over movable goods and registered on the national PPSR. Chattel mortgage terms are much shorter, usually one to seven years, and a chattel mortgage for business use sits outside the consumer credit rules that apply to home loans.

What is an example of a chattel mortgage?

A GST-registered electrician buys a $55,000 ute, including $5,000 GST, on a five-year chattel mortgage at an illustrative 10% p.a. The business owns the ute from day one and repays about $1,169 a month. It claims the $5,000 GST credit on its next BAS, which is under the car limit cap, and deducts the interest and depreciation for the business-use share. With a 30% balloon, the repayment falls to about $956 a month, with $16,500 due at the end.

Chattel mortgage for a car, ute or van

Two ATO limits shape the tax result on a passenger car. The car limit, $69,883 for 2026-27, caps the cost you can depreciate, and the GST credit is capped at one-eleventh of it, $6,353, however much GST you actually paid. Both apply to passenger vehicles designed to carry fewer than nine passengers and a load under one tonne, so a work ute or van built to carry a tonne or more is outside them.

On an expensive new car, luxury car tax is already in the price: 33% of the amount above $80,809, or $91,661 for fuel-efficient vehicles, in 2026-27. For depreciation, the ATO's effective life for a car is eight years, which is 25% a year on the diminishing value method, applied to a cost capped at the car limit. The GST credit and the deductions are limited to the business-use share.

Electric vehicles attract lender discounts: Westpac publishes up to 1% off for an electric vehicle on its business vehicle loan and CommBank up to 1% p.a. off new and used electric vehicles up to $250,000. The business vehicle loans guide covers the lenders and structures for cars, utes and vans in more detail.

Chattel mortgage for equipment and machinery

Equipment has no car limit, so a GST-registered business claims the GST on the full price. A $110,000 excavator, including $10,000 GST, returns $10,000 on the next BAS; financed over five years at an illustrative 10% p.a., the repayment is about $2,337 a month, or about $1,911 with a 30% balloon.

For income tax you depreciate the equipment as its owner. A business with aggregated turnover under $10 million can immediately deduct an eligible asset that costs less than $20,000 (excluding GST, if registered), a threshold made permanent from 1 July 2026 by the Treasury Laws Amendment (Tax Reform No. 2) Act 2026. Assets costing $20,000 or more go into the small business pool, at 15% in the first year and 30% after that. The interest on the loan is deductible too. The equipment finance tax benefits guide works through each rule.

Balloon payments on a chattel mortgage

A balloon, or residual, is a lump sum left owing at the end of the term. It lowers the regular repayment, but interest runs on it for the whole term, so the total cost rises: $100,000 over five years at 10% p.a. is about $2,125 a month and $27,482 of interest with no balloon, against $1,737 a month and $34,238 of interest with a 30% balloon. Westpac makes the same point on its own page. Grow Finance publishes balloons of up to 40% on a three-year term.

At the end you pay the balloon, refinance it, or sell or trade the asset and use the proceeds. Set it at or below what you expect the asset to be worth at that point, so a sale covers it.

Chattel mortgage vs hire purchase vs lease

Chattel mortgage and hire purchase now land in almost the same place: since 1 July 2012 the ATO lets a hire purchase customer claim the GST up front too, and the hirer is treated as the owner for depreciation. The differences are when legal title passes, and that GST applies to all of a hire purchase agreement, including the credit charges, while a chattel mortgage's interest carries no GST. A finance lease or operating lease leaves the asset with the lessor.

What are the downsides and risks of a chattel mortgage?

• The asset is security. If you cannot make the repayments, the lender can repossess and sell it to recover what is owed.
• The balloon is a debt. It has to be paid, refinanced or covered by selling the asset, and interest runs on it for the whole term.
• You carry the value risk. If the asset is worth less than the balloon at the end, you cover the gap; under an operating lease the lessor carries it.
• Early exit can cost money. ANZ publishes that early repayment fees, which may be significant, may apply to its fixed-rate asset finance.
• Personal guarantees. ANZ publishes that directors’ guarantees may be required, which puts the directors on the hook as well as the company.
• The tax benefits have limits. The car limit caps a passenger car’s GST credit at $6,353 and its depreciable cost at $69,883 in 2026-27, claims are limited to business use, and a business not registered for GST gets no GST credit at all.

Who can get a chattel mortgage?

• An ABN: sole traders, partnerships, companies and trusts all qualify.
• The asset used fully or mostly for business.
• GST registration if you want the GST credit; it is not needed for the loan itself.
• Sole traders typically provide two years of personal tax returns and recent BAS; banks usually want two years of financials for companies.
• Under 12 months of trading, expect to need a deposit, a stronger asset or a director with equity.