Structures 3 minChattel mortgage vs finance lease
Who owns the asset, how GST works and what your accountant will want to know.
Chattel mortgage vs finance lease
Who owns the asset, how GST works and what your accountant will want to know.
With a chattel mortgage you own the asset from day one and the lender takes security over it. GST-registered businesses can usually claim the GST on the purchase price upfront, and depreciation and interest may be claimable.
With a finance lease the lender owns the asset and you rent it for an agreed term, with a residual payment at the end. Lease payments are generally treated as a business expense.
Neither is always better. The right choice depends on your cash flow, how you account for GST and what you want to happen at the end of the term. We set out both side by side and your accountant confirms the tax treatment.
- Chattel mortgage: you own it, GST often claimed upfront
- Finance lease: lender owns it, payments usually an expense
- Both can include a balloon or residual