Chattel Mortgage - Heavy Vehicle Finance Australia

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

  • full gst on the purchase price claimed as a gst off-set on next lodged business activity statement
  • depreciation and interest is claimed as a tax deduction at the end of the financial year on customers profit and loss statement reducing tax paid to the ATO
  • term of a Chattel Mortgage can range from 12 months to 84 months
    fixed interest rate applies
  • ownership of the asset is transferred to the client at time of purchase
    payments can be made weekly, monthly, quarterly, yearly or structured (i.e. agreed payments over different times of the year)
  • balloon payment at the end of the term can be applied to the loan to reduce monthly payments
  • client can contribute a deposit towards the purchase (either through trade in or cash) or fund 100% of the cost of the asset
  • A Chattel Mortgage can also be referred to as a Commercial Loan Agreement

Benefits of a Chattel Mortgage Facility

  • financing trucks or heavy equipment using a chattel mortgage loan product (as opposed to using own funds) will preserve cash flow and maximise working capital position
  • flexible payment options allow clients to make payments suitable to their cash flow
  • fixed payments allow businesses to accurately project income and expenses going forward
  • option of a balloon payment at the end of the term reduces payments over the term of the loan
  • Chattel Mortgage loans for heavy vehicles can be assessed on either a full doc or low doc basis
  • as these types of loans use the equipment as security, it allows clients to free up property equity to pursue other investment opportunities
  • balloon payment can be paid out at the end of term (by way of trade in or cash payment) or refinanced (by way of new loan agreement)
  • tax deductibility at end of the financial year as client can claim depreciation and interest as on their profit and loss statement

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.