When you're financing a vehicle or piece of equipment for business use, two structures come up constantly: a chattel mortgage and a commercial (or finance) lease. They both get you the asset, but the ownership, tax treatment, and cash flow implications are genuinely different — and picking the wrong one can cost you at tax time.
Chattel mortgage: you own it from day one
With a chattel mortgage, your business owns the asset outright from settlement, while the lender takes a mortgage over it as security. Because you own it, if you're registered for GST and use cash accounting, you can generally claim the full GST credit on the purchase price upfront, and claim depreciation and interest as business expenses. It suits businesses that want the asset on their books as their own from the start, and that have the cash flow to manage a fixed monthly repayment.
Commercial lease: you use it, the lender owns it
A commercial lease works differently — the lender (or a finance company) retains ownership of the asset for the lease term, and your business simply pays to use it. Lease payments are typically a fully deductible business expense, and depending on the structure, it can keep the asset (and the debt) off your balance sheet. At the end of the term, there's usually an option to make a final payment and take ownership, or hand it back and upgrade to something newer.
Which one actually suits you?
If you want to own the asset outright, claim GST upfront, and you're comfortable with it appearing as an asset (and liability) on your books, a chattel mortgage is usually the more straightforward choice. If you'd rather keep repayments as a simple operating expense, preserve cash flow, or you tend to upgrade equipment regularly, a lease structure often makes more sense.
"The right structure isn't about which sounds more familiar — it's about how you want the asset and the debt to sit against your business."
Exodus FinanceA quick real-world way to think about it
Tradies and businesses that keep vehicles for the long haul — five years or more — tend to lean toward a chattel mortgage, since ownership and depreciation benefits compound over time. Businesses that replace vehicles or equipment every two to three years, or that value keeping their balance sheet lean for future borrowing, often prefer the flexibility a lease offers.
Get advice specific to your business
Because the tax treatment differs, it's worth a quick conversation with your accountant about which structure suits your specific position — and we're always happy to talk through the finance side alongside them so the numbers actually stack up before you commit to either path.
Key takeaways
- Chattel mortgage: you own the asset from day one, with upfront GST claim potential.
- Commercial lease: the lender owns the asset, payments are typically a simple deductible expense.
- Long-term holders often prefer chattel mortgage; frequent upgraders often prefer leasing.
- Always confirm the tax treatment with your accountant before choosing a structure.
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