Lease vs Chattel Mortgage vs Term Loan
There's more than one way to fund equipment or vehicles, and each structure hits cash flow, ownership and flexibility differently. Compare a lease, chattel mortgage and business term loan side-by-side to see which best fits your asset and budget.
Who it's for
Business owners and finance managers comparing different ways to fund equipment, vehicles or other assets, and wanting a clear view of repayments, ownership and cash-flow impact.
What it calculates
Monthly repayments, total cost over the term, end-of-term position and a high-level tax lens across three structures: operating lease, chattel mortgage / equipment loan and business term loan.
Why it matters
Choosing the wrong structure can mean higher overall cost, tax mismatches and unnecessary cash-flow pressure. Comparing options upfront helps align funding with how long you'll use the asset and the flexibility you need.
Equipment Finance Comparator — Lease vs Chattel vs Term Loan
Asset & usage
How long you plan to keep this asset.
Lease
Chattel mortgage
Balloon = $16,000
Business term loan
| Feature | Lease | Chattel mortgage | Business term loan |
|---|---|---|---|
| Ownership | Lender / lessor owns the asset | You own the asset; secured against it during term | You own; lender usually has no direct claim on this asset |
| Typical use | Shorter-term, fast-changing assets | Vehicles, plant, core equipment | Broader business purposes |
| Monthly payment (estimate) | $1,621 Lowest total cost
|
$1,404 Lowest monthly
|
$1,759 |
| Total paid over term (ex tax) | $77,787 | $84,261 | $105,565 |
| Balloon / residual at end | $20,000 | $16,000 | None |
| Simple total cost (all cash out) | $97,787 | $100,261 | $105,565 |
| Flexibility at end | Return / upgrade / buy out | Own outright after balloon paid | Asset decision independent of loan |
Found your fit? Get tailored quotes.
Once you've found a structure that looks like the right fit on paper, the next step is to get tailored quotes and check how lenders view your business.
How this comparator works
The comparator starts with your asset cost and expected life, then models three funding structures: lease, chattel mortgage / equipment loan and business term loan. For each option it estimates monthly repayments, total cash paid over the life of the facility and end-of-term obligations, then lays them out side-by-side so you can quickly see the trade-offs between lower repayments, lower total cost, ownership and flexibility.
Standard amortisation: P × r ÷ (1 − (1 + r)−n)
Chattel: payment solved for end-of-term balloon
Lease: payment based on (price − discounted residual)
All payments use monthly compounding and a level-payment assumption. The lease total cost adds the residual / buy-out at the end; the chattel total adds the balloon. The term loan fully amortises with no balloon by default.
How to interpret your results
- Lease looks best. Helpful when you value lower upfront cost, off-balance-sheet treatment and easy upgrades more than long-run ownership and absolute lowest cost. Common for tech and fast-moving equipment.
- Chattel mortgage looks best. Often delivers a good balance of ownership, manageable repayments and lower interest rates, especially when the asset is core to operations and holds value reasonably well.
- Business term loan looks best. Useful when you lack suitable security, want to bundle multiple smaller assets, or need flexibility that isn't directly tied to the equipment; you may pay more in interest but get broader uses.
- Tax and accounting are simplified. Your accountant should confirm actual treatment and any balance-sheet implications for your structure.
How to find a repayment that fits your budget
- Compare each monthly payment to what your business can comfortably afford on existing cash-flow forecasts.
- Pressure-test with the stress-test calculator using the preferred structure's loan amount, rate and term to model slower sales or extra costs.
- Watch long terms and large balloons. If an option only works with very long terms or huge balloons, the asset may not still be productive when payments end.
- Aim for alignment. Repayments should track the asset's income-generating life and still leave headroom for working capital and surprises.
Calculator assumptions
This comparator uses standard monthly amortisation for level payments, with end-of-term balloons for the chattel mortgage and a discounted residual approach for the lease. It assumes the same asset price is financed in each structure, ignores GST input claims, depreciation schedules, instant asset write-off, lender establishment / monthly fees, FX and insurance. Real lender pricing and tax outcomes vary — your broker and accountant will confirm specifics. This is not financial, tax or credit advice. Reviewed by the LoanGorilla editorial team — last updated May 2026.