✅ Updated 2026

A chattel mortgage is the most popular way for self-employed Australian tradies to finance a work vehicle. The name sounds complicated but the concept is simple. Here's everything you need to know.

📋 In This Article

  1. →What is a chattel mortgage?
  2. →Tax benefits for tradies
  3. →Understanding balloon payments
  4. →What interest rates to expect
  5. →How to apply
  6. →FAQs

What is a Chattel Mortgage?

A chattel mortgage is a commercial loan where you borrow money to buy a vehicle (or other business equipment) and the lender takes a security interest — a "mortgage" — over that asset until the loan is repaid. You own the vehicle from day one, but the lender can repossess it if you default on repayments.

The word "chattel" just means moveable property — as opposed to real property (land). So a "chattel mortgage" is simply a mortgage over a moveable asset like a ute or van.

It's popular with tradies because the tax treatment is excellent for business use: you claim the GST component upfront and deduct interest and depreciation as ongoing expenses.

Tax Benefits for Tradies

1. Claim the full GST upfront — when you buy a vehicle using a chattel mortgage, you can claim the GST (1/11 of the purchase price) on your next BAS, rather than spreading it out over time. On a $55,000 ute, that's a $5,000 GST credit back to you immediately.

2. Claim interest as a tax deduction — the interest component of your repayments is a business expense, deductible each year. On a $50,000 loan at 7% over 5 years, that's approximately $1,800–$3,500/year in deductible interest.

3. Claim depreciation — the vehicle's value depreciates over time and you can claim that depreciation as a tax deduction (subject to the luxury car limit and applicable depreciation rules — ask your accountant).

Understanding Balloon Payments

A balloon payment is a lump sum due at the end of your loan term. Setting a balloon reduces your monthly repayments — useful for cash flow — but means a large payment is coming at the end.

Example: $55,000 ute financed over 5 years with a 30% balloon ($16,500). Your monthly repayments are based on $38,500 rather than $55,000, making them significantly lower. At 5 years, you pay the $16,500 balloon, refinance it, or sell/trade the vehicle.

Common balloon sizes: 20–40% of the vehicle's value. Higher balloon = lower repayments but more owing at the end. No balloon = higher repayments but you own the vehicle outright at the end.

What Interest Rates to Expect in 2026

Chattel mortgage rates in Australia in 2026 vary by lender, your credit profile and the loan amount. Typical ranges:

Borrower ProfileTypical Rate Range
Strong credit, established business (2+ years)6.5% – 8.5% p.a.
Good credit, ABN less than 2 years8% – 12% p.a.
Lower credit score or adverse history12% – 18%+ p.a.

Using a broker like Savvy Finance to compare 30+ lenders typically gets you a better rate than going directly to your bank — especially if your business is less than 2 years old.

How to Apply for a Chattel Mortgage

You'll typically need: your ABN (and at least 1 year's trading history for most lenders), your driver's licence, details of the vehicle you're buying (make, model, year, VIN), and either 2 years' tax returns (full doc) or bank statements showing business income (low doc).

Low-doc loans (using bank statements rather than tax returns) are available from many lenders and are popular with tradies who are relatively new to self-employment or whose tax returns don't reflect actual income.

Can I get a chattel mortgage with an ABN less than 12 months old?

Yes, though your options are more limited and rates are typically higher. Some specialist lenders will consider applications from businesses with as little as 3–6 months ABN history. A broker who specialises in tradie finance will know which lenders to approach.

Can I use a chattel mortgage for equipment as well as vehicles?

Yes — chattel mortgages can finance any depreciable business asset, not just vehicles. Trailers, plant, machinery and large tools can all be financed this way with similar tax treatment.

What's better — a chattel mortgage or a personal loan for a work vehicle?

Almost always the chattel mortgage, if you're using the vehicle for business. You lose the GST credit and the interest deduction with a personal loan. The only scenario where a personal loan might make sense is if your business use is very low — but in that case, you probably shouldn't be claiming the vehicle as a business expense at all.

Free tool: Ute Loan Repayment Calculator — work out your monthly repayments and total interest for any loan amount.

Free tool: Ute Loan Repayment Calculator — work out your monthly repayments and total interest for any loan amount.

How a Chattel Mortgage Works — Step by Step

  1. You find the vehicle — at a dealer or private sale
  2. The lender pays the seller — you do not receive the money directly
  3. You own the vehicle immediately — your name is on the registration from day one
  4. The lender takes a mortgage over the vehicle (the "chattel") as security — similar to a home loan where the bank holds the mortgage
  5. You make monthly repayments over 1–7 years at a fixed interest rate
  6. The mortgage is discharged when the loan is repaid in full — you own the vehicle free and clear

Chattel Mortgage Tax Benefits — The Numbers

BenefitHow It WorksExample (55,000 ute, 80% business use)
GST claim on purchaseClaim full GST back on next BAS$5,000 back from ATO within 3 months
Interest deductionInterest portion of repayments is deductible~$800/yr at 7% interest, 80% business = $640/yr
Depreciation deductionVehicle declines in value — claim that decline~$5,500/yr at effective life method, 80% = $4,400/yr
Running costsFuel, rego, insurance, servicing all deductibleAt 80% business use, 80% of each expense

Always use a finance broker rather than dealer finance. On a $55,000 vehicle over 5 years, a 2% lower interest rate saves approximately $3,000. Brokers access 30+ lenders and usually get a better rate than any single dealer.

Balloon Payments — Should You Include One?

A balloon payment (also called a residual) is an optional lump sum at the end of the loan — typically 20–30% of the vehicle value. Including a balloon reduces monthly repayments but means you have a large amount to pay, refinance or sell the vehicle for at the end.

For tradies with strong cash flow who want lower monthly payments, a balloon makes sense. For those who want to own the vehicle outright at the end with no surprises, set the balloon to zero.

→ Compare chattel mortgage rates — free, no obligation →

Can I get a chattel mortgage if I am a new business?

New ABNs (under 2 years) have fewer lenders available and may need to provide additional financial information or a larger deposit. Some specialist lenders focus on new businesses — a broker can identify these. Expect a slightly higher rate than an established business.

Can I refinance a chattel mortgage?

Yes — if interest rates drop or your credit improves, you can refinance to a lower rate. Calculate whether the savings outweigh any break costs before refinancing.

Is a chattel mortgage available for second-hand utes?

Yes — most lenders finance used commercial vehicles up to 10 years old at the end of the loan term. Interest rates on used vehicles are typically 0.5–2% higher than new.