Chattel Mortgage For Truck & Trailer Finance
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How Chattel Truck Mortgage Loan Works
You most likely understand how a mortgage on a home works and a Chattel Mortgage on your truck or trailer purchase is a similar concept. Your truck, referred to as the Chattel, is used as security against the truck finance loan, the mortgage, made to you by the lender. On signing the Chattel Mortgage agreement and finalising the purchase, you take ownership of your truck or trailer and then make monthly repayments as per the finance agreement.
Need an estimate payment – calculate your loan repayments here – online truck finance calculator
Chattel Mortgtage, Leasing & CHP
Not sure which business loan structure you need. We will be happy to guide you on the correct structure. we often communicate with your own accountant who understands your business to ensure everything is correct.
Want structured paymnets to suit your seasonal cashflows. Let us know. Tailoring your package to your personal suitiation is a priority in our job. Making sure you get everything required to keep you business going.
Your Jade Consultant will explain all the details of a Chattel Mortgage to you but we do recommend that you refer to your own accountant for specific advice on your individual circumstances. Get in touch with a Jade Consultant to discuss arranging a Chattel Mortgage for your truck or trailer purchase. Call 1300 000 003.
Potential Advantages of Chattel Mortgage Finance
- You have the option of paying a deposit to reduce the overall Chattel Mortgage amount and hence lower the monthly repayments.
- Any GST on the truck purchase price is a claimed on the next BAS lodged, which can be a significant benefit at certain times in your operational cycle if you are GST registered.
- The depreciation on the vehicle could be treated as a tax deduction at the end of your financial year.
- The truck finance rate interest paid on your truck Chattel Mortgage could also be claimed at the end of financial year as a tax deduction.
- Chattel Mortgage is available for both new truck and used trucks.
- Chattel Mortgage can be suitable for businesses that use a cash accounting method self employed truck owner driver, SMEs through to large, truck fleet operators depending of course on individual circumstances.
- A balloon is only an option in a Chattel Mortgage Loan (suject to lenders approval). This is a percentage of the purchase price which is payable in full at the completion of the loan term. Your Jade consultant will discuss with you, what percentage best suits your circumstances.
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Chattel Mortgage Truck Finance FAQs
Chattel Mortgage is the most popular form of finance as it suits both many truck buyers and many types of heavy vehicles. Especially following the introduction of accelerated asset depreciation measures in response to the economic impacts of coronavirus. But with its unusual name, it can be misunderstood. In addition to the detail provided on our web pages, we’ve included these more specific responses to assist you understand this type of financing. If you have further questions about Chattel Mortgage truck loans, please contact us so we can answer you directly.
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In relation to a truck loan, the chattel is the truck. Chattel is term which refers to assets, belongings and moveable property as distinct from fixed or real estate property. It is a term used in many legal and financial documents. The heavy vehicle is the Chattel and the mortgage is the actual loan.The heavy vehile or chattel is used as security for the loan. The lender accepts the truck as security while the borrower has full use and possession and is responsible for all costs associated with the running of the vehicle. While Chattel Mortgage may have an unusual name it has a simple structure.
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All commercial finance facilities present a tax deductible feature (as long as the goods or truck is used for more than 50% business use) but it is realised in different ways. In the case of Chattel Mortgage, the full monthly repayment is not fully deductible only the interest portion of that payment. The main tax benefit is realised when the end of year business accounts are prepared. The truck is depreciated in line with the current ATO rulings at that time for that business. Depreciation means that a percentage of the purchase price, not the loan amount but the price/value of the truck, is deducted as a business expense each year. The ATO have a depreciation schedule which details the percentage allowed each year and your accountant will apply this when preparing your annual accounts.In regard to GST, the full amount of GST payable on the truck purchase can be claimed on the first BAS statement after purchase. As all the GST has been accounted for, no GST is applicable to the repayments. GST is not applied to the interest component of any loan.
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Most commercial finance facilities have the option to defer or set aside a portion of the truck purchase price for payment at the end of the loan term – subject to lender approval and age of asset. With Chattel Mortgage, that is referred to as the balloon. It is usually described as a percentage of the purchase price of the truck – 20%, 30% or whatever is determined as preferred by the borrower and approved by the lender, or it can be a set figure. The principle repayments are based on the loan amount less the balloon whilst the interest is paid on the full amount including teh balloon finance borrowed.The balloon is due for payment when all the repayments are finalised. Interest is charged. Balloons can be paid in cash, payed out with a trade-in or in some cases it is preferred to refinance the balloon with a new truck loan.
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The word mortgage in terms of a Chattel Mortgage is simply referring to it being a loan. A mortgage or loan is taken over the chattel which is the truck. While mortgage is most commonly heard in reference to a home loan, a truck Chattel Mortgage has quite a different finance structure. While home loans can have fixed or variable interest rates which can change with the official interest rate, a Chattel Mortgage for a heavy vehicle loan is at a fixed interest rate. That means the rate and the repayment amount is fixed for the entire term of the loan. It will not change and there should be no need to address your loan until it is time to finalise.