✅ Updated 2026

If you're financing a work vehicle as a tradie, you'll encounter two options: a chattel mortgage and a novated lease. They sound complex but the core difference is straightforward — and for most self-employed tradies, the answer is clear. Here's the honest comparison.

📋 In This Article

  1. →What is a chattel mortgage?
  2. →What is a novated lease?
  3. →Head-to-head comparison
  4. →Which is better for tradies?
  5. →FAQs

What is a Chattel Mortgage?

A chattel mortgage is the most common way for self-employed tradies to finance a work vehicle. You borrow money to buy the vehicle, which you own from day one. The lender takes a "mortgage" (security interest) over the vehicle until the loan is repaid — similar to a home mortgage but for a vehicle.

Key features:

  • You own the vehicle from purchase — it appears on your balance sheet
  • Claim GST on the purchase price upfront (on your next BAS)
  • Claim interest payments as a tax deduction
  • Claim depreciation on the vehicle's value
  • Flexible — can set a balloon payment to reduce monthly repayments
  • Fixed interest rate for the loan term (usually 2–7 years)

What is a Novated Lease?

A novated lease is a three-way arrangement between you, your employer and a finance company. Your employer pays the lease payments from your pre-tax salary, reducing your taxable income. This arrangement requires you to have an employer — it is not available to self-employed sole traders.

If you're a sole trader or work through your own company where you're the only director/employee, a novated lease is effectively not available to you. This is a common point of confusion.

Head-to-Head Comparison

FeatureChattel MortgageNovated Lease
Available to sole traders✓ Yes✗ No
Available to employees✓ Yes✓ Yes
Own the vehicle✓ From day one✗ Lease only
GST claimed upfront✓ Yes (on BAS)Varies
Pre-tax salary deduction✗ No✓ Yes
FBT considerations✗ No✓ Yes (complex)

Which Is Better for Tradies?

For self-employed sole traders: chattel mortgage, every time. You can't access a novated lease without an employer. A chattel mortgage gives you ownership, upfront GST, interest deductions and depreciation — all the tax benefits available to you.

For tradies who work as employees (e.g. apprentices, employees of a building company): a novated lease can be excellent, reducing your taxable income by paying lease costs from pre-tax salary. Talk to your employer's HR department or a financial advisor.

Want the best chattel mortgage rate? Use a broker like Savvy Finance who compares 30+ lenders — you'll typically get a better rate than going directly to a bank.

Is a chattel mortgage the same as a car loan?

Similar, but not the same. A chattel mortgage is specifically designed for business use — it has different GST and tax treatment to a personal car loan. Never finance a work vehicle on a personal car loan if you're using it for business purposes; you'll lose significant tax benefits.

What's a balloon payment on a chattel mortgage?

A balloon payment is a lump sum payable at the end of the loan term. Setting a balloon (e.g. 30% of the vehicle's value) reduces your monthly repayments during the loan term. At the end, you either pay the balloon, refinance it, or sell/trade the vehicle to cover it. Useful for cash flow management.