Chattel mortgage, finance lease, operating lease, novated lease or CHP?

Last updated 3 November 2026 · Reviewed by 360 Asset Finance Compliance

What is a chattel mortgage?

With a chattel mortgage, you take ownership of the asset immediately. The lender lends you the purchase price and takes a charge over the asset, a form of security, until the loan is repaid. You make regular repayments and, depending on the lender, may be able to add a balloon at the end. Businesses commonly use chattel mortgages for vehicles and equipment. Ask your accountant about GST and depreciation.

What is a finance lease?

Under a finance lease, the lender owns the asset and leases it to you for a fixed term. You make regular lease payments and a residual value is usually set at the start. At the end, you may be able to pay the residual and take over the asset, refinance it or trade the asset in, depending on the agreement. Finance leases are generally used for business assets. Ask your accountant how the lease payments are treated for tax.

What is an operating lease or rental?

An operating lease, or rental, lets you use an asset for an agreed term without aiming to own it. The lender keeps ownership and generally carries the risk of what the asset is worth at the end. End-of-term options are flexible and can include handing the asset back, upgrading to a newer model or extending the term. It suits assets with a limited useful life or that lose value over a short time, such as IT hardware. Your accountant can tell you how the lease is treated in your accounts.

What is a novated lease?

A novated lease is a way of salary packaging a vehicle through your employer, with payments made from your pay. It's an agreement between you, your employer and the finance provider. If you change jobs, the lease generally comes back to you, or it may move to your new employer if they agree. It's only an option if your employer offers it. Your employer and accountant can explain how it affects your tax.

What is commercial hire purchase (CHP)?

With commercial hire purchase, you hire the asset with the intention to purchase it at the end of the term. The lender owns the asset while you make regular payments, and ownership passes to you with the final payment, including any balloon or residual. CHP is suitable for business use. Ask your accountant about GST and how the payments are treated.

What is a balloon or residual payment?

A balloon (called a residual on a lease) is a lump sum due at the end of the term. Because part of the amount is left until the end, your regular repayments are lower. The balloon still has to be paid: you can pay it in full, refinance it, or sell or trade the asset to cover it. Finance charges apply to the balloon for the whole term, so it can increase the total cost. Plan for it from the start, and don't assume the asset will be worth the balloon amount at the end.

Which structure suits which situation?

• You want to own the asset from day one: a chattel mortgage.
• You want to own it at the end of the term: commercial hire purchase.
• You want options at the end of a fixed term: a finance lease.
• You want to use the asset and hand it back or upgrade: an operating lease or rental.
• You're an employee and want a car paid for through your pay: a novated lease.
• The car is mainly for personal use: ask about a car loan.

Your accountant can explain the tax side, and your broker can compare lenders on our panel.

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General information only. It doesn't take into account your objectives, financial situation or needs, and it isn't credit, tax or legal advice. Finance is provided by the lender you choose and is subject to its lending criteria; fees and charges apply. 360 Asset Finance is a trading name of Kuone Consulting Pty Ltd (ABN 75 647 329 002), Australian Credit Licence 566705.