Side-by-Side Comparison
| Feature | Chattel Mortgage (Commercial Goods Loan) | Finance Lease |
|---|---|---|
| Ownership | You from day 1 | Financier during term; you pay residual at end |
| GST | Claim 100% upfront on next BAS | Claim on each monthly payment |
| Depreciation | Yes — you claim as owner | No — financier claims |
| Interest / Payment | Interest is deductible | Entire lease payment is deductible |
| Instant Asset Write-Off | Yes (eligible as owner) | No |
| Balloon / Residual | Optional (0–50%) | Mandatory (ATO minimums) |
| Balance Sheet | On-balance sheet | Potentially off-balance sheet |
| End of Term | Own outright (or pay balloon) | Pay residual, refinance, or trade |
| Monthly Payment | Higher (if no balloon) or matched (with balloon) | Lower (mandatory residual reduces payments) |
| Complexity | Medium — track depreciation + interest | Low — one deductible payment |
See the Difference in Real Numbers
Enter your asset price and our calculator shows chattel mortgage vs finance lease repayments and tax deductions side by side.
Compare Now →When to Choose a Chattel Mortgage
- You're GST-registered: The upfront GST credit is a major advantage — cash back in your pocket within weeks via your BAS.
- You want depreciation claims: Especially powerful when combined with the instant asset write-off for eligible assets.
- You want to own the asset long-term: Trucks, earthmoving equipment, and farm machinery you'll use for 7-15 years.
- You want flexibility on balloon: A chattel mortgage lets you choose 0-50% balloon. No balloon = you own it outright at end. High balloon = lower weekly payments.
- You want to build equity: Each payment reduces the principal, building your equity in the asset.
When to Choose a Finance Lease
- You're NOT GST-registered: The upfront GST credit doesn't apply to you, so the chattel mortgage advantage diminishes.
- You want simpler tax treatment: One deductible figure per payment period — no separate interest and depreciation tracking.
- You want lower regular payments: The mandatory residual means less principal to amortise, reducing your weekly/monthly outgoing.
- You may upgrade mid-term: At the end, you can choose to refinance, trade, or return the asset — more flexibility if your needs change.
- You prefer off-balance-sheet treatment: A finance lease may be off your balance sheet (check AASB 16 applicability).
Worked Example: $100,000 Asset
A Sydney business finances a $100,000 (ex-GST) asset over 5 years at 6.5%:
| Metric | Chattel Mortgage (20% Balloon) | Finance Lease (20% Residual) |
|---|---|---|
| GST Credit | $10,000 upfront | ~$167/month on BAS |
| Monthly Payment | ~$1,712 (ex-GST) | ~$1,879 (inc. GST) |
| Yr 1 Interest Deduction | ~$6,200 | N/A (payment is deduction) |
| Yr 1 Depreciation | ~$12,500 | N/A |
| Total Yr 1 Deduction | ~$18,700 + payments | ~$20,300 (lease payments) |
| End-of-Term Payment | $20,000 balloon | $20,000 + GST residual |
Illustrative only — actual figures depend on lender, term, and rate. Use our calculator for personalised estimates.
Quick Decision Guide
| Your Situation | Recommended Structure |
|---|---|
| GST-registered, keeping asset 5+ years | Chattel Mortgage |
| GST-registered, want instant asset write-off | Chattel Mortgage |
| Not GST-registered | Finance Lease |
| Want simplest tax treatment | Finance Lease |
| Want lowest weekly payment | Finance Lease (due to mandatory residual) |
| Want to build equity in the asset | Chattel Mortgage (no/low balloon) |
| Prefer off-balance sheet | Finance Lease |
| Unsure — want flexibility | Chattel Mortgage with optional balloon |
Still Not Sure?
Run both structures through our calculator and see the exact difference in repayments and tax savings — takes 30 seconds.
Compare Both →FAQs
Which has lower total cost over the life of the agreement?▼
Generally, chattel mortgage has a lower total cost because you claim depreciation and GST upfront, plus interest deductions. Finance lease payments are fully deductible but the total outlay is typically slightly higher. However, the "real" cost depends on your marginal tax rate and GST position — our calculator models both scenarios.
Can I switch from one structure to the other?▼
Not mid-agreement. Once you sign, the structure is locked in for the term. When it's time to finance your next asset, you can choose whichever structure suits your situation at that time.
What about an operating lease?▼
An operating lease is a third option where you return the asset at the end — no residual to pay. It's essentially a rental. Less common but useful for short-term fleet vehicles or technology. Read the Operating Lease guide or compare it with a finance lease.
Do both structures require an ABN?▼
Yes — both chattel mortgage and finance lease are business finance products. You need an active ABN and a business purpose for the asset.