20 Jun Chattel Mortgage vs. Hire Purchase vs. Lease
If you’re in the market for a new car and want a clear understanding of your finance options, catch our video. We look at the benefits and disadvantages of Chattel Mortgages, Hire Purchase, and Car Lease options. Watch the video above or read the full transcript below;
Are you in need of the new car? But not in need of the finance people talking about a million products that seem the same but are slightly different and way too confusing?
Meet Kahlia, Will and Mark, who all feel the same but have discovered, there’s 3 main products you need worry about – Lease, hire purchase and chattel mortgage. Kahlia has just set up a new super successful fashion business and has decided to take out a lease. Kahlia believes this is the best product for her because she doesn’t need a deposit as all her equity is tied to her new business and the repayments are tax deductible in full meaning her business can minimise it’s tax. The only slight bummer is that at the end of the lease period, although you can usually keep it, the car may go back to the financier but like most business owners, Kahlia can just lease a new car, and in her business you gotta keep with the latest and greatest in style anyway.
That’s not a problem for the biggest Tech-head on the block, Will who has selected hire purchase as his way to go. Working as a contractor for various technology firms Will works for himself and as such, this typical facts and stats kinda guy has worked out while his ‘hire purchase’ may look much the same as Kahlia’s lease, they are different. Hire Purchase includes the certainty that at the end of the hire period the vehicle is his to keep, which gives him some certainty in his current position.
Mark, the numbers man, likes to know exactly what column to put anything new he’s bought into and the ‘chattel mortgage’ puts his dream car, for a humble accountant, right into the asset column as he owns it straight away. The chattel mortgage is a loan agreement whereby funds are borrowed to purchase a vehicle and a charge is taken over the goods that are financed. It can be 100% funded or equity like a deposit or trade can be contributed. Tax deduction is usually the interest on the facility and depreciation and if you’re a business and registered for GST, the GST on the purchase price can usually be claimed. The chattel mortgage is the most popular product at the moment thanks to it’s flexibility and the ways in which it caters to most wants and needs
To get more info on what product you think may best serve you or to get advice relevant to your situation, chat to Finance Ezi today!