Chattel Mortgages for a Sole Trader

Filed under Information Centre

Working as a sole trader means that you don't have the security of a PAYG income, and your income can be quite irregular. If you need a car to use for your business, you can qualify for a chattel mortgage even if you can't get a business car loan through the bank.

Chattel mortgages for sole traders

A chattel mortgage is a type of secured car loan that is specifically used to purchase vehicles used more than half the time to run the business.

A chattel mortgage allows you to claim GST on your purchase price and running costs. There's an advantage to this type of car loan over a personal car loan because:

  1. You'll usually get lower commercial interest rates.
  2. Loan terms like periodic payments can be more flexible.
  3. You can claim depreciation on the asset, as well as GST and interest, in your tax return.
  4. A balloon payment can help you to reduce your regular payments and boost business cash flow.

How Do I Know If I'm A Sole Trader?

You are a sole trader if you're the owner of a business, with exclusive responsibility for the services and products of that business. You keep all the profits of the business after the business expenses are paid, but you are also liable for all losses.

You will:

  • Use your individual TFN when lodging your income tax return
  • Use your ABN for all business dealings
  • report all income on your individual tax return
  • Register for GST

It's the simplest and least expensive business structure available, if you are starting a new business you will often choose this model to begin with.

You can employ other workers as a sole trader, but you can't employ yourself. The good news is that if you're using this business structure, you can still get a business car loan rather than a personal car loan to use in your business.

Here's how:

How do I apply for a sole trader chattel mortgage?

To apply for a sole trader chattel mortgage, there's a few documents that you'll need to provide to demonstrate who you are, and how you'll repay the loan.

  • Two years Tax Returns
  • Bank or financial statements showing your income
  • Your ABN, as well as proof of your ID
  • Your business address
  • Any assets and liabilities you currently have
  • Demonstrate how the vehicle will be used in the business
  • Two references
  • In some cases, a letter from your accountant with a profit forecast

With these documents, it will only take about half an hour at most to complete an online application for a chattel mortgage, and you'll be well on the way to a pre-approval.

Case Study: Sole Trader Jason buys a Mitsubishi Triton

Jason is a sole trader. He's never had a loan or credit card of any kind, but he couldn't get a car loan through the banks as his income is very irregular.

He filled out a Quick Quote on the Positive Car Finance page, hoping that someone might be able to help him out. Within two hours Jason was matched to a really good deal with a non-bank lender by the service team and had his pre-approval ready to go.

Jason found a 2012 Mitsubishi Triton that was just right at Top End Cars a few days later, and the no deposit chattel mortgage was settled on the same day.

How can I increase my chance of approval?

If you know that it'll be tight for you to make the loan repayments out of your business profits, you can increase your likelihood of approval by saving a deposit toward the car purchase.

If you'd like more information about how to apply for a chattel mortgage for your sole trading enterprise, submit an application with our customer service team.

They'll be able to guide you on the best lender to apply with, and if you're not eligible, they'll tell you what you need to do to qualify for the loan you need.

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