Chattel Mortgage vs Hire Purchase [2026]

A chattel mortgage is a business loan where you own the vehicle from day one and the lender holds a security interest over it. Hire purchase is an arrangement where the finance company owns the vehicle and transfers ownership to you only after the final payment. Both are popular ways to finance a work vehicle in Australia, but the difference between hire purchase and chattel mortgage comes down to ownership timing, GST treatment, and how each structure fits your business.

If you are an ABN holder in South East Queensland looking for the right finance structure for a ute, truck, or fleet vehicle, this guide walks you through everything you need to know.

---

Quick Comparison Table: Chattel Mortgage vs Hire Purchase

Feature	Chattel Mortgage	Hire Purchase
Ownership	You own from day one	Finance company owns until final payment
GST claim	Full GST claimed upfront on next BAS	GST claimed progressively on each payment
Best for	GST-registered businesses (turnover >$75k)	Businesses under the GST threshold
Interest deductions	Fully deductible as business expense	Interest component deductible each payment
Depreciation	Claim from settlement date	Claim from settlement date (as equitable owner)
Balloon/residual	Optional	Optional
Balance sheet	Asset + liability from day one	May be off-balance sheet (check with accountant)
Vehicle registration	In your name immediately	Finance company or your name (varies by lender)
Early payout	Pay out balance, mortgage removed	Pay out balance, ownership transfers
Typical loan term	1-7 years	1-7 years
Typical interest rates	5.5%-9.5% (2026, varies by profile)	5.5%-9.5% (2026, varies by profile)

---

What Is a Chattel Mortgage?

A chattel mortgage is a business loan where the word "chattel" simply means a moveable asset--in this case, your vehicle. The lender advances funds to purchase the vehicle, you take ownership immediately, and the lender registers a mortgage (security interest on the PPSR) over the vehicle until the loan is repaid.

Think of it like a home mortgage, except the security is a vehicle instead of a house. The car is yours from settlement day. You register it, insure it, and use it. The lender's interest is removed once you make the final payment.

How a Chattel Mortgage Works Step by Step

1. You find the vehicle you want (or we source it for you)
2. You apply for finance with your ABN and supporting documents
3. The lender approves the loan and pays the dealer or seller directly
4. The vehicle is registered in your name from day one
5. The lender registers a security interest on the PPSR
6. You make fixed monthly repayments over 1-7 years
7. Once paid off, the PPSR registration is removed--you own the vehicle free and clear

Tax Benefits of a Chattel Mortgage

For GST-registered businesses, a chattel mortgage delivers some significant advantages:

• Claim the full GST upfront: On a $66,000 vehicle (inc. GST), you claim $6,000 on your very next BAS. That is real money back in your account within weeks, not spread over years.
• Interest is fully deductible: Every dollar of interest you pay on the loan is a deductible business expense in the year you pay it.
• Depreciation: You can claim depreciation on the vehicle from settlement date. Under the ATO's simplified depreciation rules, eligible small businesses (aggregated turnover under $10 million) can instantly write off assets up to the relevant threshold. For standard depreciation, the effective life of a vehicle is typically 8 years.
• Running costs: Fuel, tyres, servicing, insurance, rego--all deductible in proportion to your business-use percentage.

Worked example--Brisbane plumber: Sarah runs a plumbing business across Brisbane's northside, turning over $400,000 a year. She buys a $72,600 Toyota HiLux SR5 (inc. GST) on a 5-year chattel mortgage at 6.9%.

Tax benefit	Amount	When
GST refund on BAS	$6,600	Next BAS period
Year 1 interest deduction	~$4,300	End of financial year
Year 1 depreciation	~$9,075 (prime cost)	End of financial year

Sarah gets $6,600 back in her pocket almost immediately, plus reduces her taxable income by roughly $13,375 in year one. That is a solid return for a business investing in a reliable work vehicle.

---

What Is Hire Purchase?

Hire purchase is a finance arrangement where the finance company buys the vehicle and you effectively "hire" it while making repayments. You have possession and use of the vehicle from day one, but legal ownership sits with the finance company until you make the final payment (including any balloon/residual). At that point, ownership transfers to you.

The key difference between hire purchase and chattel mortgage is this ownership question. With hire purchase, you are the "hirer" until the contract ends. With a chattel mortgage, you are the "owner" from settlement.

How Hire Purchase Works Step by Step

1. You choose the vehicle
2. The finance company purchases the vehicle
3. The finance company retains ownership as security
4. You take possession and make fixed monthly payments
5. Each payment covers principal + interest
6. After the final payment (or balloon), ownership transfers to you
7. Vehicle registration is updated to your name if not already

Tax Benefits of Hire Purchase

Hire purchase offers a different--but still valuable--set of tax benefits:

• GST claimed progressively: You claim the GST component on each monthly repayment, not as a lump sum. This suits businesses that prefer a steady, predictable cash flow rather than one large refund.
• Interest deductions: The interest component of each payment is deductible in the period you pay it.
• Depreciation: Even though the finance company technically owns the vehicle, the ATO treats you as the equitable owner for depreciation purposes. You can claim depreciation from the start of the agreement.
• Running costs: Same as chattel mortgage--deductible in proportion to business use.

Best for: Businesses not yet registered for GST (turnover under $75,000), or businesses that prefer spreading their GST claims across the loan term rather than claiming a lump sum upfront.

Worked example--new Gold Coast electrician: Tom started his electrical business on the Gold Coast eight months ago. He is turning over $60,000 a year and is not yet GST-registered. He buys a $44,000 Mitsubishi Express van (inc. GST) on a 5-year hire purchase at 7.4%.

Since Tom is not GST-registered, the chattel mortgage GST advantage does not apply to him. Hire purchase gives him:

• Fixed monthly repayments he can budget around
• Depreciation claims from day one
• Interest deductions on every payment
• Simpler BAS obligations (no GST to claim or remit)

---

Key Differences: Chattel Mortgage vs Hire Purchase at a Glance

Understanding the difference between hire purchase and chattel mortgage comes down to five core areas:

1. Ownership

Chattel mortgage: You own the vehicle immediately. Your name goes on the registration. The lender only has a security interest (like a mortgage on a house).

Hire purchase: The finance company owns the vehicle. You are the hirer. Ownership transfers to you only after the final payment.

In practice, this rarely affects your day-to-day use. You drive the vehicle, maintain it, and insure it either way. But it matters for business valuation, succession planning, and what happens if you sell the business or the finance company goes under.

2. GST Treatment

This is usually the deciding factor:

Chattel mortgage: Claim the full GST upfront on your next BAS. On a $110,000 truck, that is $10,000 back in one hit.

Hire purchase: Claim GST on each monthly payment. On the same $110,000 truck over 5 years, you would claim roughly $167 in GST per month.

If you are GST-registered and your cash flow can handle waiting for the BAS refund, chattel mortgage almost always wins on GST alone.

3. Balance Sheet Treatment

Chattel mortgage: The vehicle appears as an asset and the loan as a liability on your balance sheet from day one. This is straightforward and transparent.

Hire purchase: Historically, some hire purchase arrangements could be treated as off-balance sheet. Under current accounting standards (AASB 16), this is less common. Check with your accountant--this area has tightened up.

4. End-of-Term Flexibility

Chattel mortgage: When you pay out the loan, the PPSR security is removed. You own the vehicle outright with no further steps needed.

Hire purchase: After the final payment, ownership transfers. Some lenders charge a small transfer or documentation fee. If you want to sell the vehicle before the term ends, you will need to arrange a payout with the finance company first.

5. Interest Rates and Fees

Rates are generally very similar for both products. Lenders price based on your risk profile (credit history, time in business, deposit amount), not the finance structure. In 2026, expect business vehicle finance rates in the range of 5.5% to 9.5% depending on your circumstances.

---

Chattel Mortgage vs Lease: What About Operating Leases?

Some business owners also consider an operating lease (sometimes called a "chattel mortgage vs lease" comparison). Here is how they differ:

Feature	Chattel Mortgage	Operating Lease
Ownership	You own from day one	Lessor owns throughout
End of term	Vehicle is yours	Return vehicle or negotiate purchase
GST	Claim upfront	Claim on each lease payment
Depreciation	You claim it	Lessor claims it
Balance sheet	Asset + liability	May be off-balance sheet (AASB 16 dependent)
Best for	Businesses wanting to own	Businesses wanting to swap vehicles regularly

An operating lease can work well if you want a new vehicle every 3-4 years and do not want to deal with resale. But you never build equity, and you may face excess-kilometre or damage charges at return. For most SEQ businesses--especially tradies putting serious km on vehicles across Brisbane, the Gold Coast, and the Sunshine Coast--owning the vehicle via chattel mortgage or hire purchase tends to make more financial sense.

---

Novated Lease vs Chattel Mortgage: For Employees

If you are an employee (not a business owner), you cannot get a chattel mortgage or hire purchase. These are strictly business finance products requiring an ABN.

A novated lease is the employee equivalent. It is a three-way agreement between you, your employer, and a finance company. Your employer deducts lease payments from your pre-tax salary, reducing your taxable income.

Feature	Chattel Mortgage	Novated Lease
Who can use it	ABN holders / businesses	Employees (PAYG)
Tax benefit	Business deductions + GST	Salary packaging (pre-tax deductions)
Ownership	You own from day one	Finance company owns; you may purchase at end
GST	Claim on BAS	GST savings built into lease structure
FBT	Not applicable (business vehicle)	Employer pays FBT (often passed to employee)
Running costs	Separate from finance	Often bundled into one payment

If you are a PAYG employee working in Brisbane CBD, at a hospital, or for a large employer on the Gold Coast, a novated lease is worth investigating--but only if your employer offers salary packaging. If you are a sole trader, contractor, or business owner, chattel mortgage or hire purchase are your options.

For employees looking at novated leasing, check our car finance overview for more detail.

---

Tax Implications: The Detail That Matters

Tax is usually the reason business owners choose one structure over the other. Here is a closer look at how the ATO treats each option.

GST (Goods and Services Tax)

Chattel mortgage (GST-registered business):

• Claim 1/11th of the purchase price as an input tax credit on your next BAS
• Example: $77,000 vehicle (inc GST) = $7,000 GST credit on your next BAS
• This applies to the full vehicle price, not just the deposit

Hire purchase (GST-registered business):

• Claim 1/11th of each monthly payment as an input tax credit
• The GST is spread across the entire loan term
• Total GST claimed is the same--it just takes longer to get it all back

Not GST-registered? Neither option gives you a GST credit. The GST is simply part of the vehicle cost.

Income Tax Deductions

Both structures allow you to claim:

• Interest: The full interest component of your repayments
• Depreciation: Based on the vehicle's cost (less any GST claimed) and effective life
• Running costs: Fuel, maintenance, insurance, registration--proportional to business use

The ATO's instant asset write-off threshold has changed several times. For the current financial year, check the ATO website or ask your accountant whether your vehicle qualifies for an immediate deduction or needs to be depreciated over its effective life.

Fringe Benefits Tax (FBT)

If the vehicle is available for private use by an employee (including yourself if you operate through a company), FBT may apply. This is true for both chattel mortgage and hire purchase.

FBT is calculated on the taxable value of the private use. The two main methods are:

• Statutory formula: 20% of the vehicle's base value, regardless of actual private use
• Operating cost method: Based on actual private use percentage (requires a logbook)

FBT can add significant cost. On a $70,000 vehicle, the FBT liability under the statutory method can be over $6,000 per year. Factor this into your total cost of ownership.

The Car Limit

The ATO sets a car limit each financial year--this caps the amount you can claim for depreciation and GST on a passenger vehicle. For 2025-26, the car limit is $69,674. If your vehicle costs more than this, your depreciation and GST claims are capped at the limit amount.

Important exception: Vehicles designed to carry a load of one tonne or more (like most single-cab and many dual-cab utes) or vehicles designed to carry 9+ passengers are exempt from the car limit. This is why so many SEQ tradies drive HiLux, Ranger, and BT-50 utes--they often fall outside the car limit, meaning you can claim the full purchase price.

---

Which Is Better for Your Business? A Decision Framework

Rather than asking "which is better?"--ask which fits your specific situation. Use this framework:

Step 1: Are You GST-Registered?

• Yes --> Chattel mortgage is likely your better option (claim GST upfront)
• No --> Hire purchase may be simpler, but consider registering for GST voluntarily if you are close to the $75,000 threshold

Step 2: Can Your Cash Flow Handle the GST Refund Timing?

With a chattel mortgage, you pay the full GST-inclusive price upfront but wait until your next BAS for the refund. If you lodge BAS quarterly, that could be a 3-month wait.

• Cash flow is strong --> Chattel mortgage
• Cash flow is tight --> Hire purchase (smaller, regular GST credits) or chattel mortgage with a deposit to reduce the total amount

Step 3: Do You Want Immediate Ownership?

• Yes, ownership matters (business valuation, succession, fleet management) --> Chattel mortgage
• Ownership at end of term is fine --> Either option works

Step 4: What Type of Vehicle?

• Passenger car under the car limit --> Either option; chattel mortgage if GST-registered
• Commercial vehicle over one tonne carrying capacity --> Chattel mortgage is almost always better (no car limit cap on deductions)
• Heavy truck or specialised equipment --> Chattel mortgage for full GST recovery; see our truck finance guide

---

Real-World Scenarios for SEQ Businesses

Scenario 1: Brisbane Plumber -- Chattel Mortgage

Sarah runs a plumbing business across Brisbane's northside, turning over $400,000 a year. She is buying a $72,600 Toyota HiLux SR5 (inc. GST) for jobs across the city and surrounds.

Why chattel mortgage wins:

• Claims $6,600 GST on her next BAS--immediate cash back
• Vehicle registered in her business name from settlement
• Full depreciation and interest deductions from day one
• HiLux SR5 has >1 tonne payload, so the car limit does not apply--she claims on the full $66,000 (ex-GST) value
• Important for signwriting and business identity

Scenario 2: New Gold Coast Electrician -- Hire Purchase

Tom started his electrical business on the Gold Coast eight months ago. Turnover is $60,000 and growing. He needs a $44,000 work van.

Why hire purchase works:

• Not GST-registered (under $75,000 threshold), so no GST credit either way
• Fixed monthly repayments he can budget for as a new business
• Depreciation deductions still available
• Simpler structure while he builds his client base
• Once turnover passes $75,000 and he registers for GST, he can consider chattel mortgage for his next vehicle

Scenario 3: Ipswich Construction Fleet -- Chattel Mortgage

A construction company in Ipswich is adding three vehicles to their fleet, total value $198,000 (inc. GST).

Why chattel mortgage wins:

• Claim $18,000 GST upfront across the fleet--cash back on one BAS
• All vehicles registered to the company immediately
• Fleet management is simpler with direct ownership
• Straightforward for business valuation and potential sale

Scenario 4: Sunshine Coast Landscaper -- Chattel Mortgage

Jake runs a landscaping business on the Sunshine Coast, turning over $220,000. He is buying a $58,000 Mazda BT-50 and a $22,000 tandem trailer.

Why chattel mortgage wins:

• GST-registered, so claims $7,273 GST on his next BAS (both vehicle and trailer)
• BT-50 has >1 tonne payload = no car limit cap
• Both assets in his name from day one
• Interest and depreciation deductions reduce his taxable income

Scenario 5: Logan Mobile Dog Groomer -- Hire Purchase

Emma launched a mobile dog grooming service in Logan. She has an ABN but turnover is projected at $45,000 in year one. She is buying a $35,000 custom-fitted van.

Why hire purchase suits her:

• Under the GST threshold, no GST advantage from chattel mortgage
• Lower upfront complexity while she establishes the business
• Fixed repayments help with cash flow planning
• Can reassess finance structure when she buys her next vehicle

---

The Balloon Payment Question

Both chattel mortgage and hire purchase can include a balloon (residual) payment. This is a larger lump sum due at the end of the loan term, which reduces your monthly repayments during the term.

How Balloon Payments Work

Say you finance a $66,000 vehicle over 5 years with a 30% balloon:

	No Balloon	30% Balloon
Monthly repayment (approx, 7% rate)	~$1,307	~$1,020
Balloon due at end	$0	$19,800
Total interest paid	~$12,400	~$14,000

The balloon saves you $287/month in cash flow but costs about $1,600 more in total interest over the term.

When a Balloon Makes Sense

• You plan to trade the vehicle before the balloon falls due
• Your business has seasonal income and you need lower monthly commitments
• You are confident you can refinance or pay cash at the end of the term

When to Avoid a Balloon

• You plan to keep the vehicle long-term (the balloon just delays cost)
• The vehicle will depreciate below the balloon amount (you will owe more than it is worth)
• You do not have a clear plan for the lump sum payment

Our recommendation: Keep balloon payments under 30% for vehicles you plan to keep.

---

Common Mistakes to Avoid

1. Choosing Based on Monthly Payments Alone

A lower monthly payment (via a large balloon) might cost you thousands more in total interest. Always compare the total cost of the loan, not just the monthly figure.

2. Not Talking to Your Accountant First

Tax implications depend on your specific business structure (sole trader, partnership, company, trust), your turnover, your other deductions, and your personal tax rate. What works for your mate's business might cost you money. Spend an hour with your accountant before signing.

3. Forgetting About FBT

If the vehicle is available for private use by an employee (including a working director), Fringe Benefits Tax applies regardless of the finance type. FBT can add $5,000-$10,000+ per year to the cost of a vehicle. This catches a lot of people off guard.

4. Ignoring the Exit Strategy

What happens if you sell the business, wind it up, or just want out of the loan early?

• Chattel mortgage: The vehicle is your asset. Sell it, pay out the loan, keep the difference.
• Hire purchase: The finance company owns it. You need their approval and a payout figure before you can sell or transfer.

5. Not Checking the Car Limit

If your vehicle is classified as a "car" under the ATO definition and costs more than the car limit ($69,674 for 2025-26), your depreciation and GST claims are capped. Many business owners buy a $90,000 SUV assuming they can claim the full amount--they cannot, unless it meets the one-tonne or 9-passenger exemption.

6. Skipping Pre-Approval

Getting pre-approved before you shop gives you a clear budget and negotiating power. Without pre-approval, you risk falling in love with a vehicle you cannot finance--or accepting unfavourable dealer finance terms under pressure. We help SEQ businesses get pre-approved for business finance before the vehicle search even starts.

---

How to Apply for Business Vehicle Finance in SEQ

Whether you choose chattel mortgage or hire purchase, the application process follows a similar path:

1. Work out your budget: What can your business afford in monthly repayments? Factor in running costs, not just the loan.
2. Gather your documents: ABN, most recent tax return or financial statements, driver's licence, details of the vehicle you want to buy.
3. Get pre-approved: Know your borrowing capacity before you shop. We compare rates across multiple lenders--not just one bank.
4. Find the vehicle: Search yourself or let us source it through our dealer network and auction access across Australia.
5. Finalise finance and settle: Once the vehicle is chosen, we handle the paperwork. Settlement usually takes 24-48 hours for straightforward applications.

New to business? If your ABN is less than 2 years old, you can still get approved. Some lenders specialise in start-up finance with slightly higher rates but flexible requirements. Talk to us about your options.

---

Frequently Asked Questions

What is the main difference between hire purchase and chattel mortgage?

The main difference is ownership. With a chattel mortgage, you own the vehicle from day one and the lender holds a security interest (like a home mortgage). With hire purchase, the finance company owns the vehicle throughout the loan term and transfers ownership to you only after the final payment. This affects GST treatment: chattel mortgage lets GST-registered businesses claim the full GST upfront, while hire purchase spreads GST claims across each payment.

Can I get a chattel mortgage without being GST-registered?

Yes, you can get a chattel mortgage without being GST-registered. You still get the benefit of immediate ownership and can claim interest and depreciation deductions. However, you will not be able to claim the GST on the purchase price, which removes the biggest financial advantage of a chattel mortgage over hire purchase.

Is a chattel mortgage better than a novated lease?

They serve different purposes. A chattel mortgage is for ABN holders and businesses. A novated lease is for PAYG employees who want to salary-package a vehicle through their employer. If you are a business owner, you cannot get a novated lease for your business vehicle. If you are an employee, you cannot get a chattel mortgage. The right product depends entirely on your employment status.

How does chattel mortgage vs lease compare for short-term vehicle needs?

If you only need a vehicle for 2-3 years, an operating lease might suit better--you return the vehicle at the end and avoid resale risk. A chattel mortgage locks you into ownership, which means you bear the depreciation risk. However, for most SEQ businesses using vehicles daily across Brisbane, the Gold Coast, and the Sunshine Coast, owning via chattel mortgage tends to be more cost-effective over 4-5+ years because there are no excess-km penalties or end-of-lease damage charges.

Can I claim 100% of the vehicle if I also use it for personal trips?

No. You can only claim the business-use percentage. If you use the vehicle 80% for business and 20% personal, you claim 80% of expenses. You need to keep a logbook for a continuous 12-week period to establish your business-use percentage. The ATO accepts this logbook for 5 years unless your circumstances change. Be honest--the ATO does audit vehicle claims.

What happens if my business closes during the loan?

With a chattel mortgage, you personally own the vehicle and remain liable for the repayments. You can sell the vehicle to help pay out the loan. With hire purchase, you do not own the vehicle until the final payment--but you are still personally liable for the full contract. Either way, the finance company will want their money.

Do I need a deposit for business vehicle finance?

Not always. Many lenders offer 100% finance for established businesses with strong financials. However, a deposit of 10-20% typically gets you a better interest rate and lower monthly repayments. For newer businesses (ABN under 2 years), some lenders require a 20% deposit.

Which has better interest rates--chattel mortgage or hire purchase?

Interest rates are generally the same for both products from the same lender. The rate depends on your credit profile, time in business, deposit size, and the vehicle's age--not the finance structure. In 2026, expect business vehicle rates between 5.5% and 9.5%. We compare rates across 30+ lenders to find the best fit for your situation.

Can I refinance a hire purchase to a chattel mortgage?

It is technically possible but rarely worth the hassle. You would need to pay out the hire purchase, take ownership, then set up a new chattel mortgage. The break costs, documentation fees, and new establishment fees usually outweigh any benefit. Choose the right structure from the start.

What about salary sacrificing through my company?

If you operate through a company structure and are both a director and employee, you may be able to salary sacrifice a vehicle--but FBT will almost certainly apply. Talk to your accountant about whether the after-FBT cost makes it worthwhile compared to a straight chattel mortgage through the business.

---

Ready to Get Started?

Choosing between chattel mortgage and hire purchase does not need to be complicated. For most GST-registered SEQ businesses buying utes, trucks, or commercial vehicles, chattel mortgage is the stronger option. For new businesses under the GST threshold, hire purchase keeps things simple.

Either way, we compare rates across 30+ lenders and handle all the paperwork so you can focus on running your business.

• Business car finance -- Chattel mortgage, hire purchase, and ABN finance options
• Truck finance -- Heavy vehicle and commercial fleet finance
• Car finance overview -- Compare all your finance options
• Get in touch -- Free consultation, no obligation

Related reading

• Tax deductions for business vehicles -- maximise your deductions legally
• How to finance a truck for your business -- utes, trucks, and commercial vehicle finance
• Novated lease vs car loan -- an employee's alternative to chattel mortgage

---

This guide is general information only and is not financial or tax advice. Tax and finance laws change regularly. Always consult a qualified accountant or financial adviser before making business finance decisions. Information is current as of February 2026.