Compare finance types
Chattel mortgage vs Operating lease: which is right for your business?
The main difference between a chattel mortgage and a operating lease is how they are secured and repaid: a chattel mortgage suits businesses buying vehicles or equipment they want to own and depreciate, while a operating lease suits businesses replacing equipment on a fixed cycle who want no residual or resale exposure.
Chattel mortgage vs Operating lease at a glance
| Chattel mortgage | Operating 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. | An operating lease is a rental agreement where the financier owns the asset, carries the residual value risk and leases it to your business for a fixed monthly payment over an agreed term. At the end you simply hand the asset back, with no residual to pay and no resale to manage. |
| Amount | $10,000 – $2,000,000 | $10,000 – $2,000,000 |
| Term | 12–84 months | 12–60 months |
| Indicative rate | 6.9% – 14.5% p.a. | 7.5% – 15% p.a. |
| Rate type | Fixed | Fixed |
| Security | Secured by the asset | Secured by the asset |
| Repayments | Monthly (weekly or fortnightly available) | Monthly rental |
| Typical speed | 24–48 hours for low-doc up to $150k; longer for full-doc | 2–5 business days |
| Best for | Businesses buying vehicles or equipment they want to own and depreciate | Businesses replacing equipment on a fixed cycle who want no residual or resale exposure |
| Consider the other if | Assets you plan to return or upgrade every couple of years | Long-life assets you intend to keep and own outright |
| Tax | Interest and depreciation are generally deductible and GST may be claimable upfront. Confirm with your accountant. | Rentals on business-use assets are generally deductible as an operating expense and GST is charged on each payment. Confirm with your accountant. |
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 operating lease
A operating lease is usually the better fit for businesses replacing equipment on a fixed cycle who want no residual or resale exposure. Its main advantages are no residual to pay and no resale risk at term end, fixed, predictable monthly cost, simple upgrade path onto newer equipment. Consider the alternative if long-life assets you intend to keep and own outright.
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.
Operating lease
An operating lease is a rental agreement where the financier owns the asset, carries the residual value risk and leases it to your business for a fixed monthly payment over an agreed term. At the end you simply hand the asset back, with no residual to pay and no resale to manage.