Finance question
Novated lease vs chattel mortgage for a work vehicle?
It depends on who is really buying the vehicle and how it is used. A novated lease is a salary-packaging arrangement between you, your employer and a lender, usually for a car with personal use. A chattel mortgage is a business buying a vehicle it owns from day one. For a work vehicle owned by your business, a chattel mortgage is the usual fit.
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The short answer
Who owns it, and how it is used
These two suit different situations because they involve different people. A novated lease is a three-way arrangement between an employee, their employer and a lender. Repayments come out of the employee's salary package, and it is typically used for a car that has a good deal of personal use. It travels with the person, not the business.
A chattel mortgage is a business buying a vehicle in its own right. The business owns the asset from day one, the lender holds security until it is repaid, and it is built for gear used mainly for business. For a ute, van or truck that your business owns and runs, this is generally the structure that fits.
So the deciding question is who the vehicle really belongs to and how it is used. An employee wanting to package a car through their pay leans novated. A business buying a work vehicle it will own leans chattel mortgage. Tax treatment differs between them and depends on your circumstances, so check with your accountant; we place the finance across 40+ lenders.
Which fits you?
What points to novated or chattel mortgage.
Who owns it?
A business buying its own vehicle points to a chattel mortgage.
How is it used?
Mainly business use suits a chattel mortgage; heavy personal use can suit novated.
Employee or business?
A novated lease runs through an employee's salary package.
What suits your tax?
Treatment differs, so check with your accountant.
Why they suit different people
Novated travels with you
A salary-packaged car tied to the employee, useful when personal use is high.
Chattel mortgage is the business's
The business owns the vehicle from day one, with the lender holding security.
Match to the owner
Who the vehicle belongs to and how it is used decides the right structure.
A real example
A plumber buys a $55,000 work ute through their business under a chattel mortgage. The business owns it from day one and it goes straight onto the job. An office employee wanting a car packaged through their pay, with plenty of private use, would look at a novated lease instead. Illustrative only.
Common questions
Frequently asked questions
Which is right for a business work vehicle?
Usually a chattel mortgage, where the business owns the vehicle from day one. A novated lease suits an employee packaging a car through their salary.
Do I own the car with a novated lease?
The arrangement runs through your salary package with the lender holding the asset. Ownership options depend on the lease terms at the end.
Can a sole trader use a novated lease?
Novated leases rely on an employer and salary packaging, so they generally suit employees. A sole trader buying a work vehicle usually looks at a chattel mortgage.
Which is better for tax?
Treatment differs and depends on your circumstances. Your accountant is best placed to confirm; we structure the finance to suit.