Compare finance types
Hire purchase vs chattel mortgage: which is right for your business?
The main difference between hire purchase and a chattel mortgage is when you take legal ownership: under hire purchase the financier holds title until the final instalment is paid, while under a chattel mortgage your business owns the asset from the day it is purchased and the lender simply registers a security interest over it.
Chattel mortgage vs Hire purchase at a glance
| Chattel mortgage | Hire purchase | |
|---|---|---|
| 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. | Hire purchase is an asset finance structure where the financier buys the asset and hires it to your business for a fixed term, with ownership transferring automatically once the final instalment — including any balloon — is paid. It sits between a lease and a chattel mortgage, and is used less often in Australia since GST reforms favoured the chattel mortgage. |
| Amount | $10,000 – $2,000,000 | $10,000 – $2,000,000 |
| Term | 12–84 months | 12–84 months |
| Indicative rate | 6.9% – 14.5% p.a. | 7% – 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 | 24–72 hours for low-doc, longer for full-doc |
| Best for | Businesses buying vehicles or equipment they want to own and depreciate | Businesses wanting eventual ownership where a lender or accountant specifically prefers this structure |
| Consider the other if | Assets you plan to return or upgrade every couple of years | Most GST-registered businesses, where a chattel mortgage usually delivers a better GST outcome |
| Tax | Interest and depreciation are generally deductible and GST may be claimable upfront. Confirm with your accountant. | Interest and depreciation are generally claimable, and GST treatment differs from a chattel mortgage. Confirm with your accountant before choosing. |
| Who holds title during the term | The financier | Your business |
| GST on the purchase price | Generally not claimable upfront | Generally claimable in the next BAS |
| When ownership transfers | Automatically on the final instalment | At purchase |
| Availability on the panel | Offered by some lenders | Offered by nearly all asset financiers |
| Balloon or residual option | Yes — final balloon instalment | Yes — balloon at term end |
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 hire purchase
A hire purchase is usually the better fit for businesses wanting eventual ownership where a lender or accountant specifically prefers this structure. Its main advantages are ownership transfers automatically on the final payment, fixed instalments with an optional balloon, secured pricing, well below unsecured lending. Consider the alternative if most gst-registered businesses, where a chattel mortgage usually delivers a better gst outcome.
Our verdict
For most GST-registered Australian businesses a chattel mortgage is the better default, because the GST on the purchase price is generally claimable in the next BAS rather than spread across the term. Hire purchase remains worth considering where a specific lender offers better terms on that asset class, or where your accountant recommends the structure for reporting reasons.
These two structures produce very similar repayments, so the comparison is rarely about rate. Hire purchase was the standard Australian structure before GST reform, and the shift to chattel mortgage happened because claiming the full GST credit upfront is a genuine cash-flow advantage — on a $110,000 machine that is $10,000 back in the next quarter rather than dribbled out across five years.
Where hire purchase still earns its place is lender appetite. A financier with a strong position in a particular asset class may only offer hire purchase, and a sharper rate on the structure they prefer can outweigh the GST timing difference. Your broker prices both on the same asset and shows the dollar difference rather than arguing the principle.
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.
Hire purchase
Hire purchase is an asset finance structure where the financier buys the asset and hires it to your business for a fixed term, with ownership transferring automatically once the final instalment — including any balloon — is paid. It sits between a lease and a chattel mortgage, and is used less often in Australia since GST reforms favoured the chattel mortgage.