What is a chattel mortgage?
How the most common business vehicle and equipment loan works: who owns the asset, how balloons work, and how it compares with leasing and hire purchase.
Jane BrookerFinance broker · Updated 6 October 2026 · 5 min readA chattel mortgage is a business loan to buy a vehicle or equipment. Your business owns it from day one, and the lender holds security over it until the loan is paid off. It’s one of the most common ways Australian businesses finance utes, trucks and machinery.
“Chattel mortgage” sounds old-fashioned and complicated. It isn’t. A chattel is just a movable thing, like a ute, a truck or a machine. A chattel mortgage is a loan secured against that thing.
If you’re buying a vehicle or equipment for your business, it’s the loan you’ll hear about most.
How it works
- You choose the vehicle or equipment, from a dealer, a supplier or sometimes a private seller.
- The lender pays the seller. Your business owns it from the start.
- The lender takes security over it. This means the lender can take it back if the loan isn’t repaid. The lender records its interest on the Personal Property Securities Register (PPSR), the national register of security interests.
- You make regular repayments, usually monthly, over a set term. A deposit or trade-in is optional with many lenders, and so is a balloon payment at the end.
- When the loan is paid off, the lender must remove its PPSR registration. The vehicle or equipment is yours, free and clear.
You can see what the repayments might look like in my repayment calculator.
Chattel mortgage, lease or hire purchase?
There are a few ways to finance business vehicles and equipment. The big difference is who owns it.
| Chattel mortgage | Hire purchase | Finance lease | Rental (operating lease) | |
|---|---|---|---|---|
| Who owns it | Your business, from day one | The lender, until the last payment | The lender | The lender or rental company |
| GST | Usually claimed upfront on the purchase price | Usually claimed upfront | Paid on each payment | Paid on each payment |
| At the end | It’s yours once the loan and any balloon are paid | It becomes yours on the last payment | Return it, or offer to buy it or lease it again | Return it, upgrade or keep renting |
None of these is “best” for everyone. It depends on your business, your cash flow and how you’ll use the asset. Your accountant can tell you which suits you, and I’ll find lenders for the one you choose.
GST and tax: the general rules
This is general information, not tax advice. Speak to your accountant about your situation.
GST on the purchase. With a chattel mortgage, your business is buying the vehicle or equipment, so the GST is in the purchase price. If your business is registered for GST and holds a tax invoice, it can generally claim a GST credit in its BAS. The timing depends on whether you report GST on a cash or accruals basis.
- If you use it partly for private purposes, the credit is limited to the business share.
- For cars, the GST credit is capped. In 2026–27 it is generally no more than 1/11 of the car limit, which is $6,353.
- There’s no GST credit if there was no GST in the price, for example when you buy from a private seller who isn’t registered for GST.
No GST on interest and loan fees. Interest and most lender fees are “input taxed” financial supplies. That means there’s no GST in them, and no GST credit to claim.
Interest. The business share of the interest is generally deductible. The private share isn’t.
Depreciation. Because your business owns the asset, it is generally the one that claims depreciation.
The car limit. For cars, there is a cap on the cost you can depreciate. For cars first used in 2026–27, it’s $69,883. But a vehicle designed to carry 1 tonne or more, or 9 or more passengers, isn’t a “car” for this rule. Some utes carry 1 tonne or more. The ATO measures it as the payload: the GVM on the compliance plate minus the basic kerb weight.
Instant asset write-off. Small businesses (turnover under $10 million) can generally write off assets that cost less than $20,000 each, in the year the asset is first used or installed ready for use. From 1 July 2026, this $20,000 threshold is permanent. The whole cost must be under $20,000, even if you only use the asset partly for business, so it won’t cover most new utes or trucks. More expensive assets can usually go into the small business pool instead.
The rules have conditions and exceptions. Please check with your accountant before you buy, not after.
Who can get a chattel mortgage?
A chattel mortgage is a business loan. It’s for vehicles and equipment used mainly for your business. Lenders usually lend to:
- Sole traders, partnerships, companies and trusts with an ABN
- Businesses buying new or used vehicles and equipment
- Buyers who can show the business can make the repayments
If a vehicle will be used mostly for personal driving, a consumer car loan is the right kind of loan, and it comes with extra legal protections. I can help with either.
What lenders look at
- Your business: how long you’ve been trading, GST registration, and your recent figures.
- Your credit history.
- The vehicle or equipment: what it is, its age and condition, and who is selling it.
- The loan: the price, any deposit or trade-in, the term and any balloon.
Read what documents lenders ask for to get ahead.
Balloon payments
Many chattel mortgages have the option of a balloon: a lump sum at the end that lowers your regular repayments. It also means you pay more interest overall. Read balloon payments explained before you choose one.
