Jade Truck Loans FAQs
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.
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.
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.
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.
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.