The three main structures
| Chattel mortgage | Finance lease | Rental / operating lease | |
|---|---|---|---|
| Who owns the asset | You, from day one (lender holds security) | Lender owns; you use | Provider owns; you use |
| End of term | Asset is yours (pay any balloon) | Pay residual to own, or return/re-lease | Return, extend or upgrade |
| GST | Claim GST on price upfront (if registered)* | GST on each payment | GST on each payment |
| Tax deduction | Depreciation + interest | Lease payments (generally) | Rental payments (generally) |
| Best for | Long-hold assets: trucks, trailers, machines | Assets you'll return or churn | Fast-obsolescence tech, short needs |
*GST and tax treatment depends on your registration, accounting basis and circumstances — confirm with your accountant. General information only.
Why chattel mortgage dominates transport
Most truck and equipment buyers intend to own and run the asset for years, want the GST back on the next BAS rather than across the term, and value depreciation deductions. The chattel mortgage delivers all three, which is why the overwhelming majority of deals we see are written this way — the truck finance guide assumes it by default.
When a lease genuinely wins
- Planned churn. If you replace the asset every 3–4 years regardless (imaging equipment, some fleet policies), a lease with managed residuals removes disposal risk.
- Off-balance-sheet preferences. Larger businesses with covenant or ratio considerations sometimes prefer rental structures (accounting standards have narrowed this — talk to your accountant).
- Genuine uncertainty. Short contracts or trial expansion suit rental flexibility despite the higher effective cost.
Frequently asked questions
Can I claim the interest on a chattel mortgage?
Yes — interest and depreciation are generally deductible to the extent of business use. The principal component is not deductible (you're buying an asset).
What happens at the end of a finance lease?
You pay the residual to take ownership, return the asset, or re-lease it. Residuals are set within ATO guideline ranges based on term.
Which structure is cheapest?
Chattel mortgage usually wins on total cost for long-hold assets once GST timing and depreciation are counted. Leases buy flexibility, not savings. Model your actual numbers with your accountant.
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