Chattel Mortgage vs Finance Lease for Trailer Finance
These are the two most common ways businesses finance a trailer. They can have similar repayments, but they work differently for ownership, GST and tax.
Chattel mortgage in a nutshell
With a chattel mortgage, you own the trailer from day one. The lender lends you the money and registers a security interest over the trailer on the PPSR until the loan is repaid. It works much like a car loan, but for business use.
- You can generally claim the GST on the purchase price upfront in your next BAS, if you're registered for GST.
- You can generally claim the interest and depreciation on the trailer as business deductions.
- A balloon payment can be added to lower your regular repayments.
Finance lease in a nutshell
With a finance lease, the lender buys the trailer and leases it to you for a fixed term. You pay rent, and at the end you can usually pay a residual amount to take ownership, refinance the residual, or hand the trailer back.
- GST is included in each lease payment rather than claimed upfront on the purchase.
- The lease payments are generally deductible as a business expense.
- There's always a residual at the end, and for leases there are ATO guidelines on minimum residual values.
Talk to a Specialist
Tell us about the trailer and we'll pass your enquiry to a broker who works with it regularly. Free, and enquiring doesn't affect your credit score.
Send an Enquiry →Side by side
| Chattel mortgage | Finance lease | |
|---|---|---|
| Who owns the trailer | You | The lender, until you pay the residual |
| GST | Claimed upfront on the purchase | Claimed on each payment |
| Typical deductions | Interest and depreciation | Lease payments |
| End of term | Pay any balloon, then it's yours outright | Pay the residual, refinance it, or return the trailer |
Which suits who?
Chattel mortgage tends to suit GST-registered businesses that want to own the trailer, would like the GST back early to help cash flow, and plan to keep the trailer for a long time. It's the most common structure for owner-operators.
A finance lease can suit businesses that prefer to treat the trailer as an operating cost, that regularly upgrade equipment, or whose accountant prefers the lease treatment for their particular situation.
Talk to your accountant first. The right structure depends on your business's tax position, how you account for GST and your plans for the trailer. This page is general information, not tax advice.
Not running a business? Neither of these is for you. Personal buyers use consumer finance instead. See personal vs business trailer finance.