A Chattel Mortgage is one of the more common types of finance and is simply where a lender will loan you money to purchase an asset in your name, taking a mortgage over the asset as security.
Different to a lease, as the asset is in your name, from the outset you can immediately claim back the GST on the purchase price and you can depreciate the asset. Also unlike a lease, you can have any balloon/residual amount set, even zero. There is also no GST on the regular repayments.
While the full amount of the asset can be financed, normally the EX GST price is financed (with you paying the initial GST) as the purchase GST can be claimed back on your BAS.
No maintenance is included in chattels and, once the contract finalises (with you paying the balloon – if applicable) the mortgage is removed from the asset, which you will own unencumbered.
- Client can claim the GST component up front
- Residual is controlled by the client
- Client is responsible for residual risk
- Can claim the depreciation
- Own the car in the end