Two common ways to fund new equipment, how they differ structurally, and which one tends to suit a growing business.
When a business needs to fund equipment — anything from a piece of machinery to a fleet vehicle — a chattel mortgage and a lease are two of the most common structures on offer. They both get the equipment working for the business without paying the full price upfront, but they’re built differently, and that difference matters for who owns the asset, how it sits on the books, and how repayments are treated.
With a chattel mortgage, the business takes ownership of the equipment from day one. The lender registers a mortgage over the asset as security for the loan, but the business owns it, uses it as its own from the start, and the mortgage is simply released once the loan is paid out.
With a lease, the finance company (or lessor) owns the equipment, and the business pays to use it over the lease term. At the end of the term there’s typically an option to pay out a residual value and take ownership, hand the equipment back, or in some cases re-lease newer equipment instead.
Because a chattel mortgage and a lease are structured differently — one is a loan secured against an asset you own, the other is a right to use an asset someone else owns — they’re also usually treated differently for GST and depreciation purposes. Exactly how each applies depends on the business’s GST registration, accounting method, and how the equipment is used, and the rules around instant asset write-offs and depreciation schedules change from year to year. This is genuinely one to run past your accountant with the specific numbers in front of them, rather than relying on general guidance — we can talk through the finance structure, but the tax treatment is their call to make with you.
A practical way to decide: if you want to own the equipment outright and it has a long useful life for the business, a chattel mortgage is usually the more natural fit. If the equipment dates quickly or the business likes to upgrade on a cycle, a lease keeps that flexibility built in. Either way, get your accountant’s view on the tax side before you commit.
Both structures are available across the panel, and the right one often comes down to how the business plans to use — and eventually replace — the equipment, not just which one has the lower headline repayment. Tell us what you’re financing and how the business runs, and we’ll lay out what a chattel mortgage and a lease would each look like for your specific numbers.
Send us the details and we’ll come back with options across both structures, matched to how your business actually operates.