If you're buying a car, ute or van, one of the first questions is how it will be used. That decides whether a consumer car loan or a chattel mortgage is the better fit.
Consumer car loan
A consumer car loan is for vehicles used mainly for personal purposes. It's regulated under the National Consumer Credit Protection Act, which means the lender and broker must make sure the loan is not unsuitable for you. Loans can be secured by the car, which usually means a lower rate, or unsecured.
Chattel mortgage
A chattel mortgage is the most common way for businesses and sole traders to finance a vehicle used mainly for business. The business owns the vehicle from the start, and the lender takes a mortgage over it until the loan is repaid. Many chattel mortgages let you add a balloon payment at the end to lower the regular repayments.
How to choose
- Mostly personal use? A consumer car loan is usually the right structure.
- Mostly business use, with an ABN? A chattel mortgage is often the better fit. Ask your accountant about any tax implications for your situation.
- Thinking about a balloon? It lowers repayments but leaves a lump sum at the end, so plan how you'll pay or refinance it.
Questions to ask before you sign
- What's the comparison rate, and what fees are included?
- Is there a balloon, and how much is it?
- Can I make extra repayments or pay out early, and is there a fee?
- What happens if my circumstances change?
Not sure which structure suits you? Apply online or call us and we'll walk you through it.
This article is general information only and doesn't take into account your objectives, financial situation or needs. Speak to your accountant about tax.