Chattel Mortgage

Common Questions about Chattel Mortgages

• Do I fully own the car during the loan term of a chattel mortgage, or does the lender have some control over it?

  With a chattel mortgage, you own the vehicle from the moment of purchase. However, the lender places a mortgage over the car as security for the loan. This means that while you have full use of the vehicle, the lender retains an interest in it until the loan is fully repaid. Unlike hire purchase arrangements, where ownership transfers at the end, with a chattel mortgage, you're the legal owner from day one.

• What happens if I can’t keep up with the chattel mortgage repayments? Can the lender take the car away?

  If you fall behind on repayments, the lender can repossess the vehicle since it serves as security for the loan. However, most lenders prefer to work with you to find a solution before taking this step. Contact your lender immediately if you're having trouble making payments, as they may offer options like restructuring your repayments, temporarily reducing payments, or extending the loan term. The key is communicating early rather than missing payments without notice.

• Am I eligible to claim GST on the vehicle’s purchase price, and how does that work?

  Yes, if your business is registered for GST and the vehicle is used for business purposes, you can typically claim the GST on the purchase price. You can also claim tax deductions for interest and depreciation costs associated with the loan. However, the tax implications can be complex and vary depending on your business structure and vehicle usage, so we recommend seeking own independent tax advice from a qualified accountant to ensure you're maximising your benefits.

• Can I deduct the interest repayments for a chattel mortgage, and how do I calculate the business-use portion?

  You can typically deduct the interest payments as a business expense, but only for the portion of vehicle use that's business-related. If you use the car 70% for business and 30% for personal use, you can claim 70% of the interest as a deduction. Keep a logbook to track business versus personal use, and consult with a tax professional to ensure you're calculating and claiming deductions correctly.

• What if the car’s value drops faster than expected? Will I owe more than it’s worth?

  This situation, known as negative equity, can occur with any vehicle loan. If the car depreciates faster than you're paying down the loan, you might owe more than it's worth. To minimise this risk, consider making a larger deposit, choosing a shorter loan term, or selecting a vehicle that holds its value well. Some lenders also offer gap insurance to protect against this scenario.

• How do I prepare for the balloon payment at the end of the loan? What if I can’t afford it?

  Start planning for your balloon payment well before it's due. You can save for it gradually, refinance the remaining amount into a new loan, or trade in the vehicle and use its value toward the payment. If you can't afford the balloon payment when it's due, speak to your lender about refinancing options or extending the loan term. Planning ahead gives you more options.

• Do I have to use the car mainly for business purposes, or can I use it for personal trips too?

  You can use the vehicle for both business and personal purposes. However, if you're claiming tax deductions, you can only claim the business-use portion of expenses like interest and depreciation. Keep accurate records of your business versus personal use to ensure you're claiming the correct percentage of deductions.

• Does Credit One also provide chattel mortgages for business equipment?

  Yes, we offer chattel mortgages for various types of business equipment beyond vehicles. An equipment loan through a chattel mortgage works similarly to vehicle financing - you own the equipment from purchase, while we hold security over it. This differs from operating leases, where you make lease payments but never own the asset. Our finance consultants can help you determine whether a chattel mortgage or other financing option works best for your specific equipment needs.