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Hire purchase finance is an agreement between you and the lender to acquire a motor vehicle for your business.

During the hire period, the lender legally owns the car and you pay regular instalments to the finance company.

For tax purposes you can claim depreciation, running costs and interest paid, against your business income.

When you pay off the loan in full, legal ownership is then transferred to you.

• You will own the asset at the end of the term.
• GST is not charged on a monthly rental or residual payment.
• Tax deduction when the vehicle is used for business purpose.

Chattel mortgage is essentially a mortgage over goods to be financed.

Chattel mortgage is classed as a cash sale in that the goods automatically become your property on purchase and the finance company takes a mortgage over the chattels.

Just as a hire purchase you can claim depreciation, running costs and interest paid, against your business income.

The chattel mortgage allows businesses to claim the full input tax credit from GST incurred expenses immediately (next BAS statement).

Those using their motor vehicles for business purposes can take out a hire purchase loan or chattel mortgage but will have to keep a log book and document the percentage of the vehicle use that is for business, which is tax-deductible.

The terms of both products are essentially the same, including the balloon payment at the end, but the chattel mortgage has overtaken popularity over hire purchases since the introduction of GST and the Business Activity Statement (BAS).

• Asset is recorded on your balance sheet.
• Claim the initial GST on the purchase price at BAS time.
• Claim depreciation on the vehicle.
• All interest is tax deductible.

A finance lease is a form of car finance that allows a customer (that’s you if you’re a business owner) the use of a commercial vehicle or car while enjoying all the benefits of ownership.

However, technically the financier owns the car until you finish your lease term and make the necessary residual payment.

• Get the latest model.
• No deposit.
• Does not sit on your financials as an asset or liability.
• Tax deduction for the lease payments

Yes. You can claim a lot on your vehicle providing you use the vehicle more for business than personal use.

It is usually 30% but it can be less.

Reduced monthly repayments because it is a smaller loan.

Yes. You can also trade the vehicle in and upgrade to a newer model

Yes. Some financiers will charge a small exit fee but this is not a significant amount.

5 years. 7-year terms are available if you have a good risk profile