The business owns the asset from the first day and grants the financier a mortgage over it. In effect it is close to a hire purchase, and the difference is real enough to matter in a few specific situations.
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
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The short version
Chattel mortgage in four lines.
→Title passes at the start, not the end. The business owns the asset from settlement and the financier holds a mortgage over it rather than holding title.
→Economically it is close to a hire purchase. Same full amortisation, same ordinary tax position, same absence of anything falling due at the end. Two roads, broadly one destination.
→It matters where ownership must be demonstrable. Some contracts, licences and asset registers ask who owns a thing, and "the financier until 2029" is a more awkward answer than "us, subject to a mortgage".
→Indicative only. Every band on this page is illustrative. Actual rates, fees and terms come from the lender after assessment of the business and the specific asset.
What it is
A loan, and a mortgage over the thing it bought.
The mechanism is simpler than the name suggests. A chattel is an item of movable property, and a chattel mortgage is a mortgage over one. The financier advances the money, the business buys the asset and takes title in its own name, and the financier registers a security interest over that asset on the Personal Property Securities Register.
From there the arrangement behaves like any secured term loan. The business repays principal and interest across an agreed term, the security stays in place until the debt is discharged, and the financier can enforce against the asset if the payments stop. Because the full amount is amortised, nothing falls due at the end and the security is simply released.
It is worth noting that the terminology is used loosely in the New Zealand market. Since the Personal Property Securities Act 1999 came into force, most security over goods is described in terms of security interests rather than mortgages, and some financiers use the phrase for what is functionally a secured goods loan. What matters for a borrower is not the label but the answer to three questions: who holds title, what is registered, and what falls due at the end.
Indicative rate band
8% to 16% p.a.
What is registered
A security interest
Falls due at the end
Nothing
Balance sheet
Asset and liability
The comparison
Chattel mortgage against hire purchase.
The two are frequently offered interchangeably and the differences are narrow. This table is the whole of them.
Chattel mortgage
Hire purchase
Who holds title in the term
The business
The financier
What the financier holds
A registered security interest
Title, plus a registered interest
What the payment amortises
The full amount
The full amount
Depreciation ordinarily claimed by
The business
The business
GST on the purchase
Generally up front
Generally up front
Due at the end
Nothing, the security is released
Nothing, title passes
Shows in an ownership register as
The business
Depends on the register
The differences between the two structures. Tax treatment in both is subject to the accountant’s confirmation.
Why the difference matters
Three situations where title from day one is worth having.
For most purchases the distinction is academic, and a business choosing between the two on price alone will usually find them within a rounding error of each other. There are situations where it is not academic, and they share a theme, which is somebody outside the transaction asking who owns the asset.
The first is contractual. Some supply agreements, tender conditions and licences require the operator to own the equipment it uses, and a hire purchase gives an answer that requires explanation. The explanation is usually accepted and it is still an extra conversation at a moment when nobody wants one.
The second is registration. Where an asset appears on a register that records an owner, having the business named there from day one is cleaner than having the financier named and needing to update it later. The third is presentational, and it is about a business that wants its asset schedule to show what it owns without a column of caveats. None of these are large, and each is a real reason a business occasionally prefers this structure.
Tax and GST
The same position as a hire purchase, for the same reason.
Because the business is the owner in both form and substance, it is ordinarily treated as the owner for tax purposes, so the depreciation claim sits with it and a GST-registered business is generally able to claim the GST on the full purchase price in the return covering the period the agreement begins, subject to the accountant’s confirmation of the accounting basis used. The interest component of the payments is ordinarily deductible while the principal is not, again subject to the accountant’s confirmation. Under a hire purchase the same treatment is reached by looking through the retention of title to the economic substance; here it arrives directly. Same destination, and one fewer step to explain.
Worked scenarios
Two situations, illustratively.
Illustrative scenarios on stated assumptions. The figures are indicative and are produced by the calculator on this page.
A workshop financing $80,000 of plant
Where it made no difference
The business was quoted both structures at the same rate and term. On these assumptions a 48-month facility at an indicative 11% carries a payment near $477 a week either way, the tax treatment is the same, and nothing falls due at the end of either.
It signed a hire purchase because that was what the supplier’s financier wrote by default. Nothing was lost by that, which is the honest answer for most purchases and is worth saying plainly rather than manufacturing a distinction.
Indicative figures
Amount financed
$80,000
Term
48 months
Indicative weekly
~$477
Practical difference
None here
A contractor with an ownership condition in a supply agreement
Where it did
A supply agreement required the contractor to own the equipment used on the contract. A hire purchase would have satisfied the substance and raised a question at exactly the point the contract was being signed.
In this scenario the contractor asked its financier for a chattel mortgage instead, which it wrote at the same rate. Title sat with the business from day one, the ownership condition was met without explanation, and the financier’s position was identical because its security interest was registered either way.
Indicative figures
Constraint
A contractual ownership condition
Structure chosen
Chattel mortgage
Rate difference
None
What it avoided
A conversation, at a bad moment
The process
What a chattel mortgage application typically involves.
Almost identical to a hire purchase, with one step that differs. Written as an observation of what commonly happens rather than as instructions.
01
Same day once a quote exists
The asset and the supplier are identified
A quote or invoice naming the asset, its serial or VIN number and the price opens the file, exactly as it would on a hire purchase. Nothing about the assessment differs at this stage.
Documents commonly required
·Supplier quote or invoice
·Serial or VIN number
02
1 to 5 working days
The business is assessed
Serviceability and security are assessed on the same basis as any asset facility. Trading history carries more weight than the asset, and the documents requested are the ordinary ones.
Documents commonly required
·12 months of bank statements
·NZBN and GST details
·Financial statements above larger amounts
03
At settlement
Title passes to the business at settlement
This is the step that differs. The supplier invoices the business rather than the financier, the business takes title, and the financier registers its security interest against the asset at the same time. Where a supplier is used to writing hire purchase agreements, it is worth confirming it will invoice the business directly.
Documents commonly required
·Invoice made out to the business
·Signed loan and security agreement
04
1 to 3 working days after acceptance
The security is registered and funds are advanced
The financier registers on the PPSR and pays the supplier. Insurance naming the financier is normally a condition, and the first payment usually falls a month after settlement.
Documents commonly required
·PPSR registration
·Insurance certificate naming the financier
The invoicing step is the one that occasionally causes friction. A supplier accustomed to hire purchase may default to invoicing the financier, which is inconsistent with the business taking title, and it is easier to raise before the invoice is raised than after.
Honest assessment
Where a chattel mortgage fits, and where it does not.
Where it fits
·Something outside the transaction requires the business to own the asset
·The asset appears on a register that records an owner
·The business wants the ordinary ownership tax position without the retention-of-title step
·The asset will be kept past the end of the term
·The financier offers it at the same rate as a hire purchase, which is common
Where it does not
·Nothing outside the transaction cares who holds title, which is most purchases
·The financier prices it above its hire purchase, which some do
·The asset will be replaced on a shorter cycle than the term
·A lower payment through the term is needed, where a residual structure is the relevant one
·The asset is already owned, where a secured asset loan is the closer fit
Test the maths
A chattel mortgage, in weekly numbers.
The same arithmetic as a hire purchase, because both amortise the full amount. Indicative only, and not a quote or offer of credit.
The published source for the depreciation treatment referred to on this page.
FAQ
Chattel mortgage in New Zealand, questions answered
What is a chattel mortgage?
A loan secured by a mortgage over goods. The business buys the asset and takes title immediately, and the financier registers a security interest over it. Economically it produces almost the same outcome as a hire purchase, and the difference is that title passes at the start rather than at the end.
How is it different from a hire purchase?
Only in when title passes and what the financier holds. Under a hire purchase the financier holds title until the final payment; under a chattel mortgage the business holds title throughout and the financier holds a registered security interest. The payment, the amortisation, the tax position and the ending are all broadly the same.
Which is cheaper?
Frequently neither, and many New Zealand financiers price them identically because their security position is effectively the same. Where a lender does price them differently, it is worth asking why, because there is no structural reason for a large gap.
Why does the term chattel mortgage cause confusion?
Because the Personal Property Securities Act 1999 replaced the older law of chattel securities, so most security over goods is now described as a security interest rather than a mortgage. The phrase survives in the market and is sometimes used loosely for what is functionally a secured goods loan. The label matters less than who holds title, what is registered, and what falls due at the end.
Do all New Zealand lenders offer a chattel mortgage?
Not all, and most asset financiers offer something functionally equivalent even where they use a different name. Where a lender writes only hire purchase, the practical question is whether anything outside the transaction actually requires title to sit with the business, because in most purchases nothing does.
Does the supplier need to do anything differently?
It invoices the business rather than the financier, because the business is taking title. A supplier used to writing hire purchase agreements may default to the other arrangement, and it is a great deal easier to raise before the invoice is raised than to correct afterwards.
When would a business prefer a chattel mortgage?
Where something outside the transaction requires it to own the asset, such as a supply agreement or licence condition, or where the asset appears on a register recording an owner. In those cases title from day one avoids an explanation at a point where nobody wants one.
What is the tax treatment?
Ordinarily the same as a hire purchase, because the business is the owner in both form and substance. The depreciation claim sits with the business subject to the accountant’s confirmation, the GST on the purchase is generally claimable up front on the same basis, and the interest component of the payments is ordinarily deductible while the principal is not.
What happens at the end of the term?
Nothing falls due. The final payment discharges the debt and the financier releases its security interest, which is recorded on the register. The business already held title throughout, so there is no transfer to complete.
Can a used asset be bought under a chattel mortgage?
Yes, on the same basis as a hire purchase. Terms shorten as the asset ages because the term is set against the asset’s residual value at the end, and a PPSR search on any used purchase is standard, because a registered interest attaches to the goods rather than to the seller.
Indicative content only. Not personalised financial advice.
Financing a machine is a commitment that runs for years, and the repayments come out of the same operating cash flow as everything else. Modelling the weekly and monthly cost against the working-capital position before committing is what this site is built for. Borrowing at a level that stays comfortable through a quiet quarter, rather than only through a strong one, is widely regarded as the safer frame.
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What the figures show
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What the lender decides
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Tax, GST, and accountant framing
Tax-treatment statements (GST claim timing, interest deductibility, depreciation rates) are general in nature and subject to the accountant's confirmation on the specific business position. For material amounts, professional advice from a registered financial adviser or chartered accountant is widely regarded as the safer frame.
