Chattel Mortgage or Operating Lease?

The world of finance is increasingly moving towards advancements and this is no doubt opening a variety of avenues for those who are willing to buy or sell properties. When it comes to buying a vehicle, chattel mortgage and operating lease are the two common ways to get one apart from the conventional cash payments.

A chattel mortgage is a common method is Australia which is used by businesses to finance vehicles. Here the financier lends the money to the person interested and then he/she makes regular repayments for the car. Businesses which are registered for GST are more attracted towards the concept of chattel mortgage and usually when the vehicle is to be used for business purposes only.

The reason why many businesses are inclined towards the idea of a chattel mortgage is that you get to own the car from the start. This is by far one of the biggest benefits of this model of vehicle financing. Not only this but in certain scenarios, businesses have all the rights to claim interest and depreciation components. No doubt, benefits like these are compelling enough for businesses to choose a chattel mortgage.

On the other hand, in an operating lease, the person applying for the lease does not get the right to ownership of the vehicle. These lease payments are categorized under operating expenses and businesses do not get to show this as an asset in the balance sheet. This certainly affects the net asset value in the balance sheet. Also, before you apply for an operating lease, you should know that the vehicle will not be under your name and hence, you need to make your decision wisely.

However, there are quite a few benefits of the operating lease method to buy a car which you cannot afford to miss out on. As the expenses are not shown in the balance sheet, it does not affect your chances of borrowing further if need be. Moreover, you can buy the vehicle at the end and bring it under your name. It’s just that the vehicle would not be your asset until the lease is going on.

Both methods have their own set of benefits, but it is important to study the nature of your business to make the right choice. An incorrect choice in this area of activity can lead to a heavy financial crunch for your business and as a business owner, you really wouldn’t want to go through that. Seeing your business thrive is certainly among the best things you can experience. For less fatigue and more convenience, you can choose to sell your car online. For that, you need to click here to sell your car fast.

In a nutshell, no method can be regarded as the best as it best depends on your business’ finances and your preferences.

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