How does a Chattel Mortgage Work?
This type of finance is where a loan is raised to purchase any new or used Truck or Heavy Vehicles using the equipment as security. This type of loan uses the moveable chattel as security as opposed to bricks and mortar security and gives the clients notable taxation benefits.
Features of a Chattel Mortgage Facility
Benefits of a Chattel Mortgage Facility
Example of a Chattel Mortgage Facility used for Truck Finance
- Purchase Price of new Mack Superliner – $540,000 (gst inc)
- Finance Type – Chattel Mortgage
- Loan Amount – $540,000 (gst inc)
- Term – 60 months
- Balloon – 30% or $162,000
- Payments – monthly in arrears
- Client could claim $49,090.91 (full gst amount on the invoice) as an input tax credit on their next lodged business activity statement (gst calculated by $540,000 / 11 = $49,090.91)
- Depreciation and Interest claimed as a tax deduction on the company profit and loss statement – approximate reduction of taxable income by $60,000 (depending on the depreciation method used by the clients accountant)
- The 30% balloon payment applied to reduce monthly payments on the loan over the 5-year period (payments are only calculated on $378,000 – ie purchase price $540,000 less the balloon amount of $162,000)
- Fixed interest rate allowed client to easily budget for ongoing expenses
Who would use a Chattel Mortgage Product?
A Chattel Mortgage is the most commonly used form of financing heavy machinery in Australia, for businesses operating under a cash based accounting system.
Heavy Vehicle Finance advises that all clients need to discuss a particular funding scenario with their Accountant before making a decision on what product to use when financing trucks or any type of heavy equipment. By discussing Chattel Mortgage Finance with the Accountant, clients will receive the most relevant information based on their own financial structure.
Want to ask more questions about a Chattel Mortgage Finance Facility?
To discuss how a Chattel Mortgage loan works in further detail, please call one of our Finance Consultants on 1300 788 740. One of our specialists Finance Consultants will be able to suggest the best product relating to your particular funding scenario. Or alternatively you could also fast track the process by completing our online finance pre-approval form.