Chattel mortgage, lease or hire purchase: which asset finance structure fits?

A chattel mortgage finances you to buy the asset outright — you own it from settlement, the financier takes a mortgage over it as security, and you claim GST on the purchase upfront if registered for GST. It suits equipment you intend to keep and depreciate, since the asset sits on your balance sheet as yours from day one.

A finance lease has the financier retain legal ownership for the term, while you use the asset and make the payments. At the end you typically have options — pay a residual (balloon) to take ownership, re-lease, or hand it back — which suits assets that date quickly or that you'd rather not be stuck owning once they're no longer useful.

A commercial hire purchase sits between the two: the financier owns the asset during the term, you pay it off in instalments, and ownership transfers automatically once the final payment (including any balloon) is made. It's structured financing toward ownership, rather than ownership from the start or a genuine lease.

The right structure usually comes down to two questions: do you want to own this asset at the end, and how do you want the payments and depreciation to land for tax purposes. Those are accountant questions as much as lending ones, which is why getting the structure confirmed before you sign — not after — avoids paying for a form of ownership that doesn't actually suit how the asset will be used.