Transport Finance

A chattel mortgage is commonly used in the transport sector for financing trucks, trailers, and other heavy vehicles. Under this arrangement, the business takes ownership of the asset from the start, while the lender holds a mortgage over the vehicle as security until the loan is repaid.

• Ownership: Immediate ownership by the business.
• Security: The vehicle is used as security for the loan.
• Tax benefits: Businesses can claim tax deductions on interest payments and depreciation of the asset, and claim GST on the purchase price (if GST registered).
• Best for: Businesses that want to own the transport asset from the beginning.

In a finance lease, the lender purchases the vehicle or transport equipment, and the business leases it for an agreed period. The business makes regular payments but does not own the vehicle. At the end of the lease, the business has the option to purchase the asset by paying a residual value (balloon payment) or continue leasing.

• Ownership: The lender retains ownership, but the business has the option to buy at the end of the term.
• Tax benefits: Lease payments can generally be claimed as operating expenses, and GST can be claimed on the lease payments.
• Best for: Businesses that prefer flexibility without tying up capital in ownership.

With a commercial hire purchase, the lender buys the vehicle or transport equipment, and the business hires it for a set term. The business takes ownership after all payments, including any final balloon payment, have been made.

• Ownership: Ownership is transferred to the business at the end of the term.
• Tax benefits: Interest on the hire purchase and depreciation can be claimed as tax deductions.
• Best for: Businesses that want to spread payments over time and eventually own the transport asset.

An operating lease allows a business to rent the transport asset for a fixed period, typically shorter than the asset’s full lifespan. The business returns the asset to the lender at the end of the lease without any ownership obligations.

• Ownership: The lender retains ownership throughout the lease.
• Tax benefits: Lease payments are tax-deductible, and GST can be claimed on the lease instalments.
• Best for: Businesses that don’t want to own vehicles or equipment and prefer to upgrade regularly.

An equipment loan is a straightforward finance option where the lender provides funds to purchase transport vehicles or equipment. The vehicle acts as collateral for the loan, and the business makes regular repayments.

• Ownership: The business owns the asset, but the lender holds an interest in it until the loan is fully repaid.
• Tax benefits: Businesses can claim interest and depreciation.
• Best for: Companies that want ownership and full control over the transport equipment or vehicles.

Rent to own financing involves renting transport vehicles or equipment for a set term, with an option to purchase the asset at the end of the rental period. During the term, the business has full access to the asset for its operations, but ownership only transfers once the final payment is made.

• Ownership: Ownership is transferred to the business at the end of the rental period.
• Tax benefits: Rental payments may be deductible as operational expenses.
• Best for: Businesses that want the flexibility of renting with the option to eventually own the asset.

Transport companies often face cash flow challenges due to the delayed nature of payments from customers. Debtor finance, also known as invoice finance, allows businesses to access funds tied up in unpaid invoices. A lender provides an advance on outstanding invoices, giving the business immediate access to working capital.

• Ownership: Not directly tied to vehicle ownership, but improves cash flow.
• Best for: Businesses that face delayed payments from customers and need cash flow support.

• Instant Asset Write-off: Australian transport businesses may be eligible for the instant asset write-off or temporary full expensing schemes, allowing them to deduct the full cost of the vehicle or equipment (subject to thresholds) in the year it is purchased.
• GST Benefits: Businesses registered for GST can usually claim back the GST paid on the purchase or finance of transport vehicles and equipment, making GST-related benefits a significant consideration when selecting a finance option.