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 Central 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
- You find the vehicle you want (or we source it for you)
- You apply for finance with your ABN and supporting documents
- The lender approves the loan and pays the dealer or seller directly
- The vehicle is registered in your name from day one
- The lender registers a security interest on the PPSR
- You make fixed monthly repayments over 1-7 years
- 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--Moranbah mining contractor: Dave runs contract mining services near Moranbah, turning over $800,000 a year. He buys an $88,000 Toyota LandCruiser (inc. GST) on a 5-year chattel mortgage at 6.9%.
| Tax benefit | Amount | When |
|---|---|---|
| GST refund on BAS | $8,000 | Next BAS period |
| Year 1 interest deduction | ~$5,200 | End of financial year |
| Year 1 depreciation | ~$11,000 (prime cost) | End of financial year |
Dave gets $8,000 back in his pocket almost immediately, plus reduces his taxable income by roughly $16,200 in year one. That is a meaningful difference when you are running heavy equipment up to site.
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
- You choose the vehicle
- The finance company purchases the vehicle
- The finance company retains ownership as security
- You take possession and make fixed monthly payments
- Each payment covers principal + interest
- After the final payment (or balloon), ownership transfers to you
- 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 Gladstone contractor: Sarah started a cleaning business in Gladstone six months ago. She is turning over $55,000 a year and is not yet GST-registered. She buys a $38,500 Hyundai Staria van (inc. GST) on a 5-year hire purchase at 7.4%.
Since Sarah is not GST-registered, the chattel mortgage GST advantage does not apply to her. Hire purchase gives her:
- Fixed monthly repayments she 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 CQ businesses--where vehicles do serious km on regional roads--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 at a mine site in Moranbah, Middlemount, or Dysart, a novated lease is worth looking at--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 CQ tradies and mining contractors drive HiLux, Ranger, and LandCruiser 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 CQ Businesses
Scenario 1: Moranbah Mining Contractor -- Chattel Mortgage
Dave runs a mining services business based in Moranbah, turning over $800,000 a year. He is buying an $88,000 LandCruiser 300 for site access and client meetings across the Bowen Basin.
Why chattel mortgage wins:
- Claims $8,000 GST on his next BAS--immediate cash back
- Vehicle registered in his business name from settlement
- Full depreciation and interest deductions from day one
- LandCruiser 300 has >1 tonne payload, so the car limit does not apply--he claims on the full $80,000 (ex-GST) value
- If Dave sells his business, the vehicle is an asset on his books
Scenario 2: New Gladstone Contractor -- Hire Purchase
Sarah started a commercial cleaning business in Gladstone six months ago. Turnover is $55,000 and growing. She needs a $38,500 van.
Why hire purchase works:
- Not GST-registered (under $75,000 threshold), so no GST credit either way
- Fixed monthly repayments she can budget for as a new business
- Depreciation deductions still available
- Simpler structure for a business still establishing its accounting systems
- Once turnover passes $75,000 and she registers for GST, she can consider chattel mortgage for her next vehicle
Scenario 3: Rockhampton Beef Operation -- Chattel Mortgage for Fleet
A cattle property west of Rockhampton needs three new utes for the station, total value $210,000 (inc. GST).
Why chattel mortgage wins:
- Claim $19,091 GST upfront across the fleet--cash back on one BAS
- All vehicles registered to the business immediately
- Fleet management is simpler with direct ownership
- Farm vehicles doing station work are exempt from the car limit
- Straightforward for succession planning when the property changes hands
Scenario 4: Mackay Electrician -- Chattel Mortgage
Jake is a sole-trader sparky in Mackay, turning over $180,000. He is buying a $62,000 Ford Ranger XLT.
Why chattel mortgage wins:
- GST-registered, so claims $5,636 on his next BAS
- Ranger has >1 tonne payload = no car limit cap
- Interest and depreciation deductions reduce his taxable income
- Owns the ute in his name from day one--important for signwriting and business identity
Scenario 5: Emerald Couple Starting a Food Truck -- Hire Purchase
Tom and Lisa are launching a mobile food business in Emerald. They have an ABN but turnover is projected at $40,000 in year one. They are buying a $45,000 used truck.
Why hire purchase suits them:
- Under the GST threshold, no GST advantage from chattel mortgage
- Lower upfront complexity while they establish the business
- Fixed repayments help with cash flow planning in a seasonal market
- Can reassess finance structure when they buy their 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. For utes and trucks doing heavy km in CQ conditions, vehicles depreciate faster than city cars--factor that into your balloon decision.
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 CQ businesses get pre-approved for business finance before the vehicle search even starts.
How to Apply for Business Vehicle Finance in CQ
Whether you choose chattel mortgage or hire purchase, the application process follows a similar path:
- Work out your budget: What can your business afford in monthly repayments? Factor in running costs, not just the loan.
- Gather your documents: ABN, most recent tax return or financial statements, driver's licence, details of the vehicle you want to buy.
- Get pre-approved: Know your borrowing capacity before you shop. We compare rates across multiple lenders--not just one bank.
- Find the vehicle: Search yourself or let us source it through our dealer network and auction access across Australia.
- 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 CQ businesses using vehicles hard over long distances, 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 CQ 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
- Truck finance for CQ businesses -- utes, trucks, and commercial vehicle finance
- Car finance mistakes to avoid -- common traps that cost buyers thousands
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.
