Which is cheaper, a chattel mortgage or a lease?

Neither is reliably cheaper. Monthly repayments on a lease are often lower because of the residual, while a chattel mortgage typically costs less over the full term once ownership is accounted for. Compare total cost of finance.

Can I claim GST on a chattel mortgage?

Businesses registered for GST can generally claim the GST on the purchase price in the relevant activity statement, rather than across each repayment. Confirm the treatment with your accountant.

Can I refinance an existing chattel mortgage?

Yes, subject to the current payout figure and the age and value of the asset. It is a common way to reduce repayments or release equity in owned plant.

Chattel Mortgage vs Equipment Lease | Comparison

Q: What happens at the end of a lease?

You pay the residual and take ownership, refinance the residual over a further term, or return the asset to the lender. The options should be stated in the lease documents.

The core difference is ownership

The rest follows from that distinction. A chattel mortgage is a loan to buy something: the asset is yours from the moment of settlement, and the lender simply registers an interest over it until the debt is cleared. A lease is a rental with a purchase option: the lender buys the asset and you pay for the right to use it.

That difference determines how the asset appears in your accounts, how the tax treatment works, and what happens at the end of the term.

Side by side

	Chattel mortgage	Finance lease
Ownership	Yours from settlement	Lender, until residual paid
On your balance sheet	Yes, as an asset and a liability	Yes, as a right-of-use asset
Depreciation	You claim it	Lender holds the asset
GST on purchase	Generally claimable upfront	GST applies to each payment
End of term	You own it outright	Pay residual, refinance, or return
Early exit	Payout figure, then sell freely	Break costs, asset returns to lender

When a chattel mortgage makes sense

You intend to keep the asset for its full working life.
The equipment holds value: trucks, trailers, earthmoving plant, industrial machinery.
You want the depreciation deduction and upfront GST treatment.
You may want to sell or trade the asset during the term.

For most Australian businesses buying durable plant or commercial vehicles, the chattel mortgage is the default choice, and it is the structure most equipment lenders quote first.

When a lease makes sense

The equipment dates quickly and you expect to upgrade: IT, diagnostic and imaging equipment, point-of-sale fleets.
You would rather not carry the asset disposal risk.
Predictable, fully-expensed monthly payments suit how you manage the business.
You want a lower monthly figure and are comfortable with the residual.

A lease also suits situations where the equipment is tied to a fixed-term contract. If the work ends in three years, a three-year lease that hands the asset back is cleaner than owning something you no longer need.

What happens at the end of the term

This is where the two structures separate in practice, and it is worth being clear on before signing rather than in the final month.

Chattel mortgage

Once the final repayment and any residual are made, the debt is discharged and the lender releases its registered interest on the PPSR. The asset is yours with clear title, and you can sell, trade or keep it with no further reference to the lender. If a residual applies and you would rather not pay it out in cash, it can often be refinanced over a further term, subject to the age and value of the asset at that point.

Finance lease

You have three options, and the lease documents should set out all of them. Pay the residual and take ownership. Refinance the residual over a further term. Or return the asset to the lender and walk away. Returning it sounds clean but carries conditions: the equipment usually has to be in a defined condition, and excess wear, hours or kilometres can attract charges. Read those clauses at the start of the lease, not the end.

If you expect to keep the asset either way, the chattel mortgage generally gets you there with less friction and lower total cost. If you genuinely expect to hand it back, the lease is doing something the chattel mortgage cannot.

Insurance, maintenance and who carries the risk

Under both structures the business using the equipment carries the operating risk. You insure it, you maintain it, and you bear the cost when it breaks. The difference is who the insurance protects and what happens if the asset is written off.

Comprehensive insurance is a condition of settlement in almost every case, with the lender named as an interested party.
If the asset is destroyed, the insurance payout goes toward the outstanding balance. A shortfall between the payout and the payout figure remains your debt.
Maintenance obligations are usually stricter under a lease, because the lender owns the asset and expects it back in defined condition.
Registration, compliance and servicing costs sit outside the finance in both cases.

Gap or shortfall cover is worth asking about, particularly early in a term when the balance owing can exceed the market value of the equipment. Whether it is worth the premium depends on the asset and the deposit, but it is a question most quotes will not raise for you.

Getting the decision right

The structure matters as much as the rate. A chattel mortgage and a lease on the same asset can look nearly identical in monthly repayment terms and produce quite different outcomes over five years once ownership, tax and disposal are counted.

BizLend compares both structures across a panel of more than 70 lenders and sets out the total cost of each. Speak to your accountant on the tax treatment, and to us on the pricing.

Chattel mortgage vs equipment lease: which should you choose?