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*Chattel Mortgage
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'Chattel Mortgage'

The 'Chattel Mortgage' is a car finance arrangement that allows anyone registered for GST and using the cash method of accounting to claim back the GST component on the car they are buying. The reason a Chattel Mortgage is unlike other

car finance

arrangements is that you can claim the GST component in your next BAS statement.

This means that because the invoice from the dealership is made out to you, and due to the fact that invoice has been paid you are then able to claim back the full GST amount in your next BAS; a Chattel Mortgage is essentially the same as taking out a business loan and using the vehicle for security.

There are some disadvantages to the Chattel Mortgage

car finance

arrangement, unlike a lease where the vehicle does not belong to you, your balance sheet will show a debt to a financier whereas with leasing or Hire Purchase it does not.

Chattel Mortgage payments are generally made in advance with a residual at the end. The residual is a final payment amount that can be as high as 55% of the original purchase price in some cases over a 5 year Mortgage. The idea of the residual is to allow you to have smaller repayments during the course of the loan, and then to make the larger final payment once you have sold your vehicle near the end of the loan agreement.

The residual value should be equal to or lower than the estimated value of the vehicle at the end of the loan term.

Please note that the above information is factual only and does not take into account your personal financial situation. For any advice relating to financial matters always seek the advice of a professional who will take into consideration all factors relating to your situation.

Advantages:

1. A Chattel Mortgage allows you to claim the GST upfront (if you use the cash method of accounting)
2. A Chattel Mortgage allows you to put in as big a deposit as you like, or to use a trade-in vehicle as deposit
3. Chattel Mortgage s can have a residual component

Disadvantages:

1. Taking out a Chattel Mortgage on an assett means you will have to file a form 309 and a form 350 with the ATO to register a charge against the assett if the assett is being purchased by a PTY LTD company
2. The loan will show as a debt on your balance sheet

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Please note that the above information is factual only and does not take into account your personal financial situation. For any advice relating to financial matters always seek the advice of a professional who will take into consideration all factors relating to your situation.