Some options can be difficult to understand when it comes to financing your next car. So, at Corporate Car Brokers, we have broken down each option, making it easy to decide which finance option is best for you.
Chattel mortgages, sometimes called car or equipment loans, have always been a common way for Australian businesses to finance cars over the years.
What is a Chattel Mortgage?
Put simply, a chattel mortgage is a commercial finance product in which a financier lends money to a customer who is either an individual or a business. A chattel mortgage has a similar structure to a fixed rate traditional home loan or mortgage.
The customer then makes regular payments over the lease period to pay the car off. The customer has ownership over the vehicle throughout the payment period, however, the financier has ‘mortgage’ over the vehicle until the loan is completely paid off. The word ‘chattel’ refers to the car or equipment that is considered as collateral within the loan.
Benefits of a Chattel Mortgage
The reason why a chattel mortgage is a popular choice for businesses is due to the vehicle being considered as an asset within the loan agreement. Due to this, the interest rates are usually significantly lower than other types of loans and can be fixed or variable. Repayments can be flexible and structured over a range of terms - usually two to five years.
Another benefit of a chattel mortgage for the business is that they are assumed ownership of the car throughout the loan and gain complete ownership at the end of the lease period. This means that it appears as an asset on the business’ asset sheet. It is appealing for many businesses to choose this type of loan for themselves as a business owner as well as purchasing cars for employees.
Another benefit is that a balloon or residual payment can be set at the end of the term to lower monthly repayments if that is a better finance option for the business. This may be suitable for a business that is just starting out and can forecast a higher income in future years. It allows them to pay a reasonable amount to start off with and then increase payments at the end of the term when they have the means to do so.
So, if you think a chattel mortgage is the most suitable for your next car purchase, contact Corporate Car Brokers on 1300 539 010 to find out more!