Chattel Mortgage Agreements register a Bill of Sale/Chattel Mortgage/Debenture in favour of the lender.
Normally the total Stamp Duty (where applicable) is payable up front. This facility is ideal for business who operate their accounts on a cash basis and wish to claim the GST up front as input tax credit.
This facility can be structured similar to an Asset Purchase or Finance Lease facility. The term is usually two to five years and a balloon amount can also be included into the loan depending on usage and depreciation of goods. This facility is ideal when financing motor vehicles.
The Australian Taxation Office explains that:
"a chattel mortgage is a security over chattels (that is, movable articles of property) held by the lender giving the lender recourse against the chattel in the event of default by the borrower."
"Under a chattel mortgage, the purchaser takes title in the chattel from the time of purchase. The purchaser (the borrower) finances the purchase price (or part thereof) of the chattel by way of a loan, obtained from a lender, and applies the borrowed funds as payment to the supplier for the chattel."
"A hire purchase agreement is a contract for the hire of goods where the title in the goods remains with the financier and does not pass to the purchaser until either the option to purchase is exercised by the purchaser, or the final instalment is paid. This is a fundamental difference between a chattel mortgage arrangement and a hire purchase agreement."
Adelaide
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