Chattel mortgage

What is a chattel mortgage?

A chattel mortgage is a secured business loan used to buy a vehicle, machine or piece of equipment, where your business takes legal ownership of the asset from the day it is delivered. The lender registers a security interest over that asset on the Personal Property Securities Register and removes it once the loan is paid out.

“Chattel” simply means movable property, which is what separates this from a mortgage over land. The name is also the main reason people struggle to compare offers: Westpac calls it a goods loan, NAB calls it an equipment loan, and CommBank uses the formal term. Three names, one structure. If you’re gathering quotes yourself, that inconsistency is where most of the wasted time goes.

What are the downsides of a chattel mortgage?

There are five to know before you sign, and none of them appear on a lender’s product page. Ownership from day one is useful, but it means every risk that comes with owning the asset is also yours from day one.

• 01You carry the depreciation. Because you own it, a drop in resale value is your loss, not the financier’s. On assets that fall away quickly this is the single biggest cost of the arrangement, and it never appears on the loan schedule.
• 02A balloon is borrowed money you still owe. It lowers the monthly repayment by deferring principal, not by reducing it. If the asset is worth less than the balloon when the term ends, you fund that gap in cash or refinance it.
• 03Fixed usually means fixed. Most chattel mortgages are fixed rate, so paying out early to sell or upgrade commonly attracts a break cost. Ask for that figure in writing before you sign, not when you want to exit.
• 04Default means repossession. The asset is the security. A registered interest on the PPSR is what lets the lender recover and sell it, and for an owner-operator that’s often the asset the business runs on.
• 05It doesn’t suit a fitout. Once shelving, benches or partitions are fixed to a building they generally stop being movable property, which is the one thing a chattel mortgage requires. Fitouts are usually funded another way.

How much does a chattel mortgage cost?

Most lenders don’t publish chattel mortgage rates, which is why the comparison is harder than it looks. What is published is the broader benchmark: the RBA’s business lending series for July 2026 puts new small business variable loans at 7.07% p.a. and new fixed at 8.11% p.a., and the RBA lifted the cash rate to 4.60% on 29 September 2026. Asset-backed lending sits in that neighbourhood, and moves with it.

What moves your number is narrower than most people expect:

What is an example of a chattel mortgage?

Take a $60,000 ute over five years with a 30% balloon, at an illustrative 8.50% p.a. The numbers below are arithmetic on those inputs, not a quote, and they exist to show what the balloon does.

Illustrative only, on the inputs stated. Your rate depends on the factors in the table above. The GST component of a $60,000 purchase is $5,454.55, claimable on the purchase rather than spread across the repayments. Check the timing with your accountant, since it depends how you account for GST.

Chattel mortgage, finance lease or hire purchase?

The structures differ on who owns the asset, when you claim GST, and what you can depreciate. A chattel mortgage gives you ownership and the depreciation claim. A lease keeps ownership with the financier and makes the rental the deduction instead. Which one wins depends on how you account for the asset, not on which has the lower headline rate.

This is where the structure choice earns its keep. Because a chattel mortgage makes you the owner from delivery, the asset is yours to depreciate and, where it qualifies, to write off. The ATO’s instant asset write-off limit has been $20,000 for an asset first used or installed ready for use on or after 1 July 2023, and it applies per asset rather than per business, so several qualifying purchases in one year can each be deducted in full.

Eligibility turns on four things in the ATO’s own framing: your aggregated turnover including affiliates and connected entities, when the asset was purchased, when it was first used or installed ready for use, and the cost being less than the limit. That third one catches people out on financed assets. The clock runs from when the asset is ready to use, not from when you signed the contract or when the lender settled.

General information, not tax advice. Limits and eligibility change, and the ATO page above was last updated 28 August 2026. How any of this applies to your structure depends on facts we cannot see from here, so confirm it with your accountant before relying on it.

We’ve set the two out side by side, including the GST timing and the instant asset write-off position, on the chattel mortgage vs finance lease comparison. If you want the numbers on your own asset first, the asset finance calculator takes a balloon figure and shows the same arithmetic as above.

How common is equipment finance for a business this size?

It’s the biggest thing small businesses borrow for after property. ABS Lending Indicators put new small business commitments for plant and equipment finance at $20,755 million in 2025-26. That’s 35.4% of everything small businesses borrowed on fixed terms that year.

Source: ABS Lending Indicators, tables 30 and 32, original series, financial year to June 2026. ABS counts a business as small where the lender’s exposure is under $1 million and turnover is under $50 million. The figures cover plant and equipment finance as a whole, not chattel mortgages specifically, which the ABS doesn’t separate.

When is a chattel mortgage not the right call?

When the asset isn’t really a chattel, when you don’t want to own it at the end, or when you expect to exit early. Fitouts and anything fixed to a building generally fail the movable-property test. Technology that dates fast is often better leased, because the residual risk sits with the financier rather than with you. And if the plan is to upgrade in two years on a five-year term, the break cost can quietly undo the cheaper rate you chose it for.

A single lender isn’t well placed to tell you that, because they can only offer the structure they write. We work a panel, so sometimes the answer is that the product you asked about isn’t the one you need.