Chattel mortgage, hire purchase or lease for a commercial vehicle?

When you’re shopping around for a new commercial vehicle to add to your current fleet, it’d be great if it was as simple and straightforward as picking the right car and having one singular option in terms of financing.

Like so many other aspects of life though, it’s just not that easy. But in this case, the fact that you have more than one option is actually beneficial. Each of your choices has its own advantages, and the one you eventually go for - provided you’ve made a well-researched decision - is going to meet your requirements nicely.

So which one should you actually choose? Let’s explore each to determine the right one for your circumstances.

In a chattel mortgage financing agreement, the vehicle that is purchased using the borrowed money is known as the ‘chattel’. This chattel is used as security against the loan, so if you are unable to make payments for whatever reason the lender can have the vehicle repossessed and sell it to cover the remaining amount owing.

It is the business world’s version of a secured car loan, essentially.

Chattel mortgages often come with a lower interest rate, provide the borrower with ownership from the very beginning and may offer certain tax benefits.

Commercial vehicle hire purchasing involves making ongoing payments (principal and interest included) for the vehicle to the lender, with the option to purchase at the end of the fixed term.

Unlike chattel mortgages, in this agreement it is the lender who has ownership of the vehicle from the beginning and only transfers over once the final payment has been made. The hire purchaser can also choose to terminate the agreement at any stage prior to this ownership transfer taking place.

Hire purchase agreements may also come with their own potential tax benefits, and many arrangements will include maintenance costs within the monthly payment as well.

Similar to a hire purchase agreement is a finance lease. However, monthly payments for a lease are generally lower. Many people who opt for a finance lease enjoy the freedom at the end of the leasing term to upgrade freely to the latest-model vehicle.

Though, you are indeed able to purchase the vehicle at the end of the lease period for an agreed-upon amount and assume full ownership. Provided it’s worth more than the residual (final instalment) to be paid, you’re in the black!

We’ve been assisting Aussie business owners like you secure incredible financing packages for more than two decades now. So whichever type of commercial vehicle financing you end up choosing, you can bet we’ll make sure you get the best deal available.

Our team can also assist with first-class commercial equipment financing to help you effectively expand your operations and grow your business.

Find out what the Stratton Finance team can do for you today by calling us on 1300 787 288 or messaging us online - you’ll be bloody glad you did!