A Penrith concreter bought a $70,000 dual-cab on a chattel mortgage in March 2023. He took a 35 per cent balloon, $24,500, to keep the monthly repayment low, on a 3 year term at a rate around 5.5 per cent. That term ends now, in June 2026, and the $24,500 does not disappear. He either pays it in cash, refinances it, or trades the ute. Every one of those choices is now priced off a 4.35 per cent RBA cash rate, not the near-zero world he signed into. Multiply that one driveway across every tradie and transport operator who financed gear in 2022 to 2023, and you have a wave of balloon resets landing at exactly the wrong moment.
Nobody flagged this when the loans were written. The whole point of a 30 to 40 per cent residual was a smaller monthly repayment, sold on the assumption that rates would still be low when the balloon came due and that you would just roll it over cheaply. Rates are not low. Commercial asset finance for a 2 year term on a used vehicle is sitting around 8.5 to 10.5 per cent today, depending on the financier, the asset age and your trading history. The roll-over you were promised costs a great deal more than the loan it replaces.
What the reset actually costs, in dollars
Take that $24,500 balloon and refinance it over 2 years. At the original-era rate of around 5.5 per cent, the repayment is roughly $1,080 a month. At today's commercial rate of around 9.5 per cent, it is roughly $1,125 a month. That gap looks small per month, about $45, but it is the wrong way to read it. The real damage is the total interest: roughly $1,400 over two years at 5.5 per cent versus roughly $2,500 at 9.5 per cent. You are paying about $1,100 more in interest to finance the same $24,500, simply because of when the term happened to end.
Now run it on a heavier asset. A transport operator with an $80,000 balloon on a prime mover, refinanced over 3 years, pays roughly $5,300 more in total interest moving from a 5.5 per cent original deal to a 9.5 per cent reprice: about $7,000 of interest becomes about $12,300. On a fleet of three, that is close to $15,900 of pure rate drift. This is not a market crash. It is the predictable arithmetic of a cash rate that went from near-zero to 4.35 per cent while your balloon sat waiting.
The EOFY trap: trading up to reset depreciation
With 30 June days away, the temptation is to trade the old ute in, buy a new one before EOFY, and reset the depreciation clock under the instant asset write-off. For some operators that genuinely stacks up, and the exact deduction is a question for your accountant, not the dealer's F&I desk, because the write-off threshold and eligibility shift year to year. But there is a trap underneath the tax pitch the showroom will not raise: if your asset is now worth less than the balloon, you are in negative equity. A 2023 dual-cab that has done 90,000 hard kilometres may be worth $20,000 against a $24,500 balloon. Trade it and the dealer quietly rolls that $4,500 shortfall into the new facility, so you finance a new $75,000 ute plus $4,500 of dead debt at today's commercial rate. You walk out feeling like you got a tax win and a shiny new truck. You actually financed yesterday's loan at tomorrow's rate, and you will carry it for the full new term.
- Pay the balloon out in cash: cleanest option, no new interest, but it ties up working capital right when EOFY tax and BAS are due.
- Refinance the balloon only: keeps the asset, spreads the residual over 2 to 3 years, but locks in today's 8.5 to 10.5 per cent commercial rate on that slice.
- Trade and re-finance the whole asset: resets depreciation and gets newer gear, but risks rolling negative equity forward and financing a much larger sum at current rates.
The GST and depreciation angle to take to your accountant
A chattel mortgage lets a GST-registered business claim the GST credit on the purchase price up front in the BAS for the period the vehicle is acquired, rather than dribbling it out over the term. That matters for timing: buying before 30 June versus 1 July changes which BAS and which financial year the credit and the depreciation land in. If you trade up, you also trigger a balancing adjustment on the old asset, which can create an assessable gain or a deductible loss depending on its written-down value. None of that should be decided on a showroom floor. Get your accountant to model the write-off, the GST timing and the balancing adjustment together before you sign anything.
Here is what you should do. Pull your finance contract and find the exact balloon amount and the due date; it is almost always at the end of the schedule. Get a realistic trade or market value on the asset today so you know whether you are in positive or negative equity. Then do not accept the financier's renewal letter or the dealer's in-house quote as your only option. The same residual can carry a meaningfully different rate at Macquarie, a second-tier asset financier or a non-bank, and they will not volunteer that. Shop the residual across several lenders, settle the right structure before 30 June if the tax timing favours it, and decide deliberately between cash, refinance and trade rather than defaulting into whatever the dealer puts in front of you.
Disclosure: Your Finance Guide partners with Australian Lending and Investment Centre (ALG) ACL 505575 for broker matching. ALG receives commissions from lenders on settled loans. We are upfront about that because the entire point of this piece is that the dealer's first quote is not the only quote, and you deserve to see the alternatives priced honestly.