(also known as Equipment Loan, Commercial Loan, Specific Security Agreement)
A Chattel Mortgage is a commercial finance product where the customer takes ownership of the asset (chattel) at the time of purchase.
How does a Chattel Mortgage work?
Under a Chattel Mortgage the financier advances funds to the customer to purchase an asset, and the customer takes ownership of the asset (chattel) at the time of purchase.
The financier then takes a “mortgage” over the asset as security for the loan, by registering their interest over it with the PPSR.
Once the contract is completed, the security interest is removed giving the customer clear title to the asset.
COMMERCIAL HIRE PURCHASE (CHP)
(also known as Hire Purchase or Offer To Hire, often abbreviated as CHP or HP)
A Commercial Hire Purchase (CHP) is a commercial finance product where the customer hires the asset from the financier for a fixed monthly repayment over a set period.
How does a Commercial Hire Purchase (CHP) work?
Under a Commercial Hire Purchase arrangement the financier agrees to purchase the asset on behalf of the customer, and then hire it back to them over a set period.
The customer has the use of the asset for the term of the contract but is not the owner of the asset.
At the end of the contract term when the total price of the asset and the interest charges have been paid in full, the customer takes ownership of the car.
(also known as a Lease)
A Finance Lease is a commercial finance product which enables the customer to have the use of a car or commercial asset and the benefits of ownership, while the financier retains actual ownership of the asset.
How does a Finance Lease work?
The financier purchases the asset on behalf of the customer, who then leases the asset back from the financier and pays a fixed monthly lease rental for the term of the lease.
At the end of the lease the customer can either pay a residual value (final instalment) on the lease and take ownership of the asset, trade it in or re-finance the residual and continue the lease.
OPERATING LEASE/ RENTAL
An operating lease is a commercial finance product that enables the customer to have the benefits of ownership, while the financier retains the actual title.
How does an Operating lease or Rental work?
The operating lease was historically off balance sheet. This changed in January 2016 with a change in the International Accounting Standards. This effectively meant that there is a single accounting model for all leases and that they must be capitalised on the balance sheet.
The client has 3 options at the end of an operating lease or rental, they can either hand it back, continue to rent it, or make an offer to purchase it.