A business vehicle is rarely just a car. It's a tool of trade. It earns its keep on the road, on site or between jobs. The structure you choose to fund it changes who owns it, how GST is treated and what your options look like at the end of the term. This is general information only. Your accountant should confirm tax treatment for your circumstances.
The short version
A chattel mortgage means you own it from day one. A finance lease means the lender owns it and you lease it. Everything else, from tax treatment and balance sheet to end-of-term options, flows from that difference.
Chattel mortgage, in plain English
With a chattel mortgage, your business owns the vehicle or equipment from day one. The lender provides the funds and registers a security interest over the asset (the "mortgage" part), which is removed once the facility is repaid.
Repayments can be shaped with a balloon or residual amount at the end of the term, which lowers the regular repayment in exchange for a larger final one. GST-registered businesses may be able to claim the GST on the purchase price as an input tax credit up front. It's a common structure for vehicles and equipment bought primarily for business use.
Finance lease, in plain English
With a finance lease, the lender buys the asset and owns it. Your business leases it for a fixed term at fixed lease rentals, which can make budgeting straightforward.
At the end of the term you generally have options: return the asset, extend the lease, or make an offer to purchase it. Because ownership stays with the lender, a finance lease can suit businesses that refresh vehicles or equipment regularly and don't need to own the asset outright.
The questions that decide it
- Do you want to own the asset from day one?
- How long will you keep it?
- Is cash flow or ownership the priority?
- What's your GST and accounting position?
- Will you want to upgrade before the term ends?
Own it from day one, or lease it and keep your options open. The right answer is the one that matches how the asset earns its keep.
What happens next
The right structure depends on the asset, your trading position and your accountant's advice. A short assessment frames your position before any conversation. Check My Options takes about two minutes, with no documents needed at this stage.