Compare finance types
Chattel mortgage vs finance lease: which is right for your business?
The main difference between a chattel mortgage and a finance lease is ownership: with a chattel mortgage your business owns the asset from day one and can usually claim the GST upfront, while with a finance lease the lender owns the asset and you pay to use it, claiming each payment as an expense.
Chattel mortgage vs Finance lease at a glance
| Chattel mortgage | Finance lease | |
|---|---|---|
| What it is | A chattel mortgage is equipment or vehicle finance where your business owns the asset from purchase and the lender holds a mortgage over it as security until the loan is repaid. It is the most common structure for business vehicles, machinery and plant in Australia. | A finance lease is equipment finance where the lender owns the asset and leases it to your business for a fixed term, with a residual value at the end that you can pay out, refinance or return against. Lease payments are usually fully deductible. |
| Amount | $10,000 – $2,000,000 | $10,000 – $1,000,000 |
| Term | 12–84 months | 12–60 months |
| Indicative rate | 6.9% – 14.5% p.a. | 7.2% – 14.9% p.a. |
| Rate type | Fixed | Fixed |
| Security | Secured by the asset | Secured by the asset |
| Repayments | Monthly (weekly or fortnightly available) | Monthly |
| Typical speed | 24–48 hours for low-doc up to $150k; longer for full-doc | 1–3 business days |
| Best for | Businesses buying vehicles or equipment they want to own and depreciate | Businesses that refresh equipment regularly or prefer rental-style deductions |
| Consider the other if | Assets you plan to return or upgrade every couple of years | Assets you want to own outright and claim GST on upfront |
| Tax | Interest and depreciation are generally deductible and GST may be claimable upfront. Confirm with your accountant. | Lease payments are generally deductible as an operating expense. GST is charged on each payment. |
| Who owns the asset during the term | Your business | The financier |
| GST treatment | GST on price usually claimable upfront | GST paid on each lease payment |
| Tax deductions | Interest and depreciation | Lease payments |
| End of term | Pay any balloon, asset is yours | Pay residual, refinance, upgrade or return |
Rates shown are indicative ranges observed across our lender panel for the period stated. They are not an offer or quote. Your rate depends on your business, the lender, the amount, the term and the security offered. The lender makes the final credit decision.
When to choose a chattel mortgage
A chattel mortgage is usually the better fit for businesses buying vehicles or equipment they want to own and depreciate. Its main advantages are lower rates than unsecured lending, gst on the price usually claimable upfront, balloon option lowers repayments. Consider the alternative if assets you plan to return or upgrade every couple of years.
When to choose a finance lease
A finance lease is usually the better fit for businesses that refresh equipment regularly or prefer rental-style deductions. Its main advantages are payments usually fully deductible, flexible end-of-term options, preserves cash and credit lines. Consider the alternative if assets you want to own outright and claim gst on upfront.
Our verdict
Choose a chattel mortgage when you intend to keep the asset, are GST-registered and want depreciation and interest deductions. Choose a finance lease when you replace equipment on a cycle, want fully deductible payments, or prefer to decide about ownership at the end.
Both structures are secured by the asset and priced similarly, so the decision is rarely about rate. It comes down to how the asset is used, replaced and accounted for. Your accountant’s view on depreciation versus expensing usually settles it.
Chattel mortgage
A chattel mortgage is equipment or vehicle finance where your business owns the asset from purchase and the lender holds a mortgage over it as security until the loan is repaid. It is the most common structure for business vehicles, machinery and plant in Australia.
Finance lease
A finance lease is equipment finance where the lender owns the asset and leases it to your business for a fixed term, with a residual value at the end that you can pay out, refinance or return against. Lease payments are usually fully deductible.