What Is a Chattel Mortgage? How It Works and Who It Suits
Asset and Vehicle Finance
Ownership, security, the steps to settlement and what lenders check, in plain terms
A chattel mortgage is a common way for an Australian business to finance a ute, a truck or a machine. Here is what it is, how it works from quote to final payment, what it can finance, its pros and cons, and what lenders ask for.
Quick Answer
A chattel mortgage is a business loan for a vehicle or equipment where your business owns the asset from settlement and the lender holds security over it until the loan is repaid. You make regular repayments, can choose a balloon to lower them, and the security ends at payout.
Also called: chattel loan, chattel finance, and goods loan (a name some banks use for the same structure).
What is a chattel mortgage?
A chattel mortgage is a loan your business uses to buy a vehicle, machine or other movable asset, where the business owns the asset from settlement and the lender takes security over it until the loan is paid out. "Chattel" is an old legal word for movable personal property, as opposed to land, so this is a mortgage over goods rather than over a house.
The government's business glossary puts it this way: a chattel mortgage is "similar to a hire-purchase agreement, although the business owns the asset from the start". It adds that chattel mortgages require regular ongoing payments and typically offer the option of a final balloon payment to reduce them.
Source: business.gov.au, Key financial terms, read 2 October 2026. A government glossary definition, not advice.In law, the lender's interest is a security interest, not ownership. Section 12 of the Personal Property Securities Act 2009, headed "Meaning of security interest", lists a chattel mortgage as an example of a security interest at section 12(2)(c). That is why the lender registers its interest on the Personal Property Securities Register (PPSR) instead of taking title, and why the title, the asset on the balance sheet and the tax deductions all sit with your business.
Source: Federal Register of Legislation, Personal Property Securities Act 2009, compilation 14 October 2024, section 12, read 2 October 2026.The lender's protection is that registered security: if repayments stop, the contract lets it repossess and sell the asset to recover what is owed. Once the loan, including any balloon, is repaid, the security ends. Our glossary keeps a short definition of a chattel mortgage, and it sits within the wider family of asset finance options for business.
How does a chattel mortgage work, step by step?
A chattel mortgage works in six steps: you get a quote for the asset, the lender approves the loan, the lender pays the seller at settlement, it registers its security on the PPSR, you make regular repayments, and the security is released once the loan and any balloon are paid out.
| Step | What happens | Who does it | What to check |
|---|---|---|---|
| 1. Quote and structure | The asset, amount financed, term, deposit and any balloon payment are set | You, with the seller and your broker or lender | The quote names the contract as a chattel mortgage, and any balloon fits the asset's likely value at the end |
| 2. Application and approval | The lender assesses the business, its credit and the asset | The lender | Which documents it needs and how long the approval stays valid |
| 3. Settlement | The lender pays the seller from the loan and the business takes delivery and title | The lender and the seller | The tax invoice is in the business's name and matches the asset, serial number or VIN |
| 4. PPSR registration | The lender registers its security interest against the asset; because the loan paid for the asset, it is a purchase money security interest (PMSI), which can take priority over other security interests | The lender | The serial number or VIN on the registration matches the asset |
| 5. Repayments | The business repays over the term, usually monthly | Your business | Whether repayments are in advance or in arrears, and that the dates suit your cash flow |
| 6. Final payment | The last repayment and any balloon are paid and the lender ends its registration | You and the lender | A written payout figure if you finish early, and confirmation the registration has ended |
For a used vehicle bought privately, search the PPSR before any money moves. The register advises searching on the day you intend to buy, or the day before, and an online search costs $2.00. The search shows whether a security interest is recorded against the vehicle, but not how much finance is owing on it.
Sources: Personal Property Securities Register, Do a used car or vehicle search and PPSR fees and PPSR glossary entry for a purchase money security interest, read 2 October 2026; Personal Property Securities Act 2009, section 62, "When purchase money security interests take priority over other security interests".Settlement and registration usually happen within a day of each other, and our insight walks through how invoices, settlement and PPSR registration fit together.
What does a chattel mortgage look like on a real purchase?
Here is how the steps play out for an illustrative landscaping business financing two assets in the same month. The prices are examples; the thresholds are the tax office's 2026-27 figures.
A GST-registered landscaping business with a small crew buys a dual cab ute for $77,000 and a skid steer loader for $66,000, both prices including GST, and uses both only for the business. Each asset goes on its own chattel mortgage over a 5-year term, with a balloon on the ute and none on the skid steer. At settlement each lender pays the seller, the business takes title to both assets, and each lender registers its own security interest on the PPSR.
| Asset | Price including GST | GST in the price | Is it a car for tax? | GST credit the business can claim |
|---|---|---|---|---|
| Dual cab ute, payload under one tonne | $77,000 | $7,000 | Yes: designed to carry a load of less than one tonne and fewer than 9 passengers | $6,353, the 2026-27 maximum (one-eleventh of the $69,883 car limit) |
| Skid steer loader | $66,000 | $6,000 | No | $6,000 |
| Both assets | $143,000 | $13,000 | One of the two | $12,353 |
Outcome: the business can generally claim $12,353 of GST credits on the activity statement for the period it buys the two assets, then claims decline in value and interest over the term. The ute's credit is capped because its price is above the car limit, and its cost for depreciation is limited to the car limit too; a ute designed to carry one tonne or more is not a car under the definition, so neither cap would apply. These figures are illustrative only and assume 100% business use; your accountant confirms the tax result. If you are a tradie lining up two purchases at once, the tradie loan document pack lists what lenders ask for.
Sources: Australian Taxation Office, Car thresholds from 1 July, published 9 June 2026, and Motor vehicle expenses, updated 29 May 2026, both read 2 October 2026. General information only.What can a chattel mortgage finance?
A chattel mortgage can finance most movable business assets that can be identified and resold, which in practice means vehicles, equipment and trucks. Each lender sets its own limits on asset type and age, so what it will finance depends on the asset class.
- Vehicles. Cars, utes and vans used in the business, covered in our business vehicle finance guide.
- Equipment. Machinery, plant, earthmoving, medical and hospitality equipment, covered in how equipment finance works.
- Trucks. Light trucks, rigids, prime movers and trailers, covered in our truck finance guide.
Assets that are hard to identify or resell, such as software or fit-outs fixed to a building, are harder to finance this way, because the lender needs an asset it can register against and recover.
What are the advantages and disadvantages of a chattel mortgage?
The main advantages are ownership from settlement, an early GST credit for a GST-registered business, and deductions for decline in value and interest; the main disadvantages are that the asset is security the lender can take back, your business carries the asset's falling value, and a balloon leaves a lump sum owing at the end.
| Feature | Verdict | What it means for your business |
|---|---|---|
| Ownership from settlement | Advantage | The asset is the business's from day one, so it can fit it out, brand it or sell it, provided the loan is paid out on sale |
| GST credit | Advantage for a GST-registered business | The GST in the price can generally be claimed as a credit on an early activity statement, for the business-use share |
| Tax deductions | Advantage | The business claims decline in value and interest for the business-use share, and the instant asset write-off if the asset qualifies |
| Balloon option | Trade-off | A balloon lowers the regular repayment but leaves a lump sum due at the end, which you pay, refinance or cover by selling the asset |
| Asset as security | Disadvantage | If repayments stop, the lender can repossess and sell the asset under the contract |
| Falling asset value | Disadvantage | The business carries the depreciation risk, so with a large balloon or no deposit the loan can exceed the asset's value for part of the term |
| Early payout | Depends on the contract | Paying out early can add break costs or an early termination fee set out in the contract |
| Legal protections | Fewer than consumer credit, not none | A business-purpose chattel mortgage is generally outside the National Credit Code, but the unfair contract terms rules for small business contracts can still apply |
The balloon is the trade-off most worth modelling before you sign, and our guide to balloon payments and residual values compares the end amount with what the asset is likely to be worth.
Is a chattel mortgage regulated by the National Credit Code?
Not when it is for business purposes. ASIC explains that the Code applies only where credit is provided wholly or predominantly for personal, domestic or household purposes, or for residential investment property, and that "Loans to companies are not subject to the credit legislation." ASIC says "predominantly" means more than a 50% consumer component, so an asset used mainly for the business sits outside the Code. The best interests duty in ASIC's Regulatory Guide 273 also applies only to credit regulated by the National Credit Act, so it does not reach a business-purpose chattel mortgage.
Two other rules still matter. ASIC says the unfair contract terms protections cover standard form small business contracts for financial products such as business loans, where the business has fewer than 100 employees or turnover under $10 million and the upfront price payable is no more than $5 million; its examples include default fees well above the lender's actual loss and one-sided rights to vary the contract. And because the asset is not used predominantly for personal purposes, section 115 of the PPSA, "Contracting out of enforcement provisions", lets the lender and your business agree to exclude a list of the Act's enforcement steps, so the default and repossession clauses in your contract deserve a careful read.
Sources: ASIC, National Credit Code, FAQs: Does the credit legislation apply?, RG 273 Mortgage brokers: Best interests duty (RG 273.5) and Unfair contract term protections for small businesses (updated 17 August 2026); Federal Register of Legislation, Personal Property Securities Act 2009, section 115; all read 2 October 2026. General information, not legal advice.What are the requirements for a chattel mortgage?
To get a chattel mortgage you generally need an active ABN, an asset used mainly for the business, an acceptable credit history and documents showing the business can meet the repayments. Each lender sets its own thresholds for ABN age, GST registration, deposit and asset age, so the same file can suit one lender and not another.
| Requirement | What lenders typically look for | Where the rule comes from |
|---|---|---|
| ABN | An active ABN; a longer trading history widens the choice of lender | Lender policy |
| GST registration | Often preferred, and some lenders ask for it on larger loans or newer ABNs | Lender policy |
| Business use | The asset used mainly for the business, which means a business use percentage above 50% | Lender policy, and above 50% business use keeps the loan outside the National Credit Code |
| Credit history | Clear personal and business credit files, or any defaults explained | Lender policy |
| The asset | Age, condition and resale value, and a seller who can give a tax invoice or proof of ownership | Lender policy |
| Deposit | Often none for an established business; newer ABNs may be asked for one | Lender policy |
What lenders commonly look at (broker-desk observation, October 2026)
- An ABN active for around 2 years, with GST registration, typically opens the widest choice of lender. Newer ABNs are still financed, usually with a deposit, a stronger credit file or a lower-priced asset.
- The most common reasons a chattel mortgage stalls are an asset older than the lender's policy allows, an unexplained credit default, and a business-use claim the documents do not support.
- On a straightforward file with documents ready, approval typically comes back within 1 to 2 business days; private sales and older assets take longer because of the extra checks.
Indicative only, drawn from deals we have seen; not a quote, not an offer and not a prediction of what any lender will approve. Each lender's policy decides.
What documents do you need for a chattel mortgage?
The documents depend on the application type: a full doc application usually asks for recent tax returns and financial statements, while a low doc application usually relies on business activity statements, bank statements or an accountant's declaration instead. Both need ID, the ABN details and the tax invoice or seller details for the asset. Our low doc asset finance guide covers the low doc route, and the non-bank lender policy matrix sets out how lender policies differ. If a lender has already said no, see what to do when car, truck or equipment finance is declined.
If you have a quote in hand and want to know which lender's policy fits your ABN, asset and documents, that is the point where a broker can change the outcome.
How does a chattel mortgage compare with a lease or hire purchase?
A chattel mortgage is the only one of these structures where your business owns the asset from settlement; under a lease the financier owns it throughout, and under hire purchase title passes on the final payment.
- Finance lease. The financier owns the asset, the business pays rentals and claims the GST with each rental, and a residual is due at the end.
- Operating lease or rental. The financier owns the asset and the business returns, upgrades or extends it at the end.
- Commercial hire purchase. The financier owns the asset until the last payment, but for tax the business is usually treated as the holder of the asset.
The side-by-side on GST timing, tax, accounts and which structure fits is in our chattel mortgage vs lease vs hire purchase guide, and the mechanics of buying by instalments are in the commercial hire purchase guide.
What does a chattel mortgage cost?
A chattel mortgage costs interest on the amount financed plus fees, typically a lender establishment fee and the lender's PPSR registration, which itself costs $6.00 for a registration of 7 years or less.
Source: Personal Property Securities Register, PPSR fees, read 2 October 2026. PPSR fees are not subject to GST.Current rate bands, what a good rate looks like, every fee and the total cost of a quote are in our chattel mortgage rates guide.
GST: if your business is registered for GST, it can generally claim the GST in the asset's price as a credit for the business-use share, in the period it pays or is invoiced, depending on whether it accounts on a cash or non-cash basis.
Tax: the business claims decline in value and interest for the business-use share, and from 1 July 2026 a business with aggregated turnover under $10 million can immediately deduct each asset costing less than $20,000 under the instant asset write-off, which the tax office confirms is now law.
Sources: Australian Taxation Office, When you can claim a GST credit, updated 14 September 2026, and Small business support: $20,000 instant asset write-off, updated 27 August 2026, both read 2 October 2026. General information; your accountant confirms your position.What happens when a chattel mortgage ends?
When the last repayment and any balloon are paid, the loan is finished, your business keeps the asset free of the lender's security, and the lender ends its PPSR registration. If there is a balloon, you choose at the end whether to pay it in cash, refinance it, or sell or trade the asset to cover it, so plan for it with our guide to planning for a balloon at the end of the term.
The PPSR says registrations should be ended as soon as practicable, generally within 5 business days after the security interest ends, and for serial-numbered goods such as vehicles the discharge within 5 business days is mandatory. A search after payout confirms the registration is gone before you sell the asset.
Source: Personal Property Securities Register, End a registration, read 2 October 2026.Can you pay out a chattel mortgage early?
Yes, you can usually pay out a chattel mortgage early, but the payout figure can be more than the balance on your statement: the contract may add break costs, an early termination fee or unrecovered establishment costs. Ask the lender for a written payout figure before you sell, trade or refinance, and our insight explains what a payout figure includes.
A chattel mortgage is a business loan for a vehicle or equipment where the business owns the asset from settlement and the lender holds a registered security interest until the loan and any balloon are paid. It suits a business that wants to own the asset, claim the GST early and take the deductions in its own name.
Key takeaway: check the quote names a chattel mortgage, model the balloon against the asset's likely value, and read the early payout terms before you sign.Frequently asked questions
A common example is a tradie buying a work ute on finance: the business owns the ute from settlement, repays the lender monthly over a set term, and the lender holds a registered security over the ute until the loan, including any balloon, is paid. The same structure covers an excavator, a truck or a coffee machine. The worked example above follows a landscaper through two chattel mortgages, and our guide explains what asset finance covers.
A home or property mortgage is secured over land and buildings, while a chattel mortgage is secured over a movable asset such as a vehicle or a machine. A business chattel mortgage is also usually shorter, and the lender registers it on the PPSR rather than on a land title. Our glossary gives the chattel mortgage definition in brief.
The main risks are losing the asset if repayments stop, owing more than the asset is worth if its value falls faster than the loan reduces, and a balloon you cannot pay or refinance at the end. Paying out early can also cost more than the balance. Ask for a written payout figure before you sell or trade, and our glossary sets out the payout figure meaning.
Yes. For a business, a chattel mortgage is a common way to finance a car, ute or van used mainly in the business: the business owns the vehicle from settlement and the lender takes security over it. A car loan for private use is consumer credit instead, with different rules. On a car, the GST credit and the depreciation are capped by the car limit. Our guide to financing a vehicle through your business covers cars in detail.
A goods loan is a name some banks use for a chattel mortgage; it is the same structure. The business borrows to buy the goods, owns them from settlement, and the lender takes security over them until the loan is repaid. Check that the contract describes the goods and their serial number or VIN, because that is what the lender registers on the Personal Property Securities Register.
Yes. Your business owns the asset from settlement; the lender holds a security interest, not ownership. That is the key difference from a lease, where the financier owns the asset, and from hire purchase, where title passes on the final payment. The lender's interest is registered on the PPSR and ended after payout, and our insight explains what happens at settlement.
Usually yes, but lenders set age limits and private sales need extra checks. Expect the lender to want proof of ownership, a PPSR search showing no existing finance, and sometimes an inspection or valuation. An older asset can mean a shorter term or a deposit. Our guide to financing used and aged equipment sets out how age limits work.
Often yes, though the choice of lender is narrower. Lenders that finance new ABNs commonly ask for a deposit, a clean credit file, industry experience or a lower-priced asset, and some want GST registration. If a lender has declined you because the ABN is new, our guide to a business loan declined for a new ABN explains the options.
Not simply by agreement with the buyer. The loan is with your business, so the usual path is to pay it out from the sale proceeds while the buyer arranges their own finance; some lenders allow a substitution or transfer with their consent and a fresh credit assessment. Our insight on transferring a vehicle or equipment loan covers the options.
Not always. Established businesses buying newer assets are often financed without a deposit, while newer ABNs, older or specialised assets and weaker credit files usually need one. A deposit or trade-in lowers the amount financed and can widen the choice of lender. Our guide to low doc asset finance explains how deposits work on low doc files.
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