When it comes to financing a car in Australia, there are several ways to go about it—and each has pros and cons depending on whether you’re an employee, sole trader, or small business owner. The three most common types of vehicle finance are: novated leases, chattel mortgages, and personal car loans.

If you’re unsure which option suits your situation best, this guide will break it down clearly so you can make an informed decision that aligns with your cash flow, tax position, and usage needs.

Table of Contents

1. What Is a Novated Lease?
   
2. What Is a Chattel Mortgage?
   
3. What Is a Personal Car Loan?
   
4. Side-by-Side Comparison: Which One’s Right for You?
   
5. Let Capital Plus Finance Help You Choose
   

What Is a Novated Lease?

A novated lease is a three-way agreement between you, your employer, and a finance company. Your employer makes the lease repayments on your behalf using your pre-tax salary, and you get to use the vehicle.

Best for: PAYG employees (not sole traders or business owners)

Key benefits:

• Reduces your taxable income
  
• No upfront payment required
  
• Running costs (fuel, rego, insurance) can be bundled in
  
• As of 2025, eligible EVs may qualify for FBT exemptions
  

Considerations:

• You don’t own the vehicle outright unless you pay the residual at lease end
  
• Not suitable if you change jobs frequently or are self-employed
  

What Is a Chattel Mortgage?

A chattel mortgage is a business car loan where the vehicle acts as security for the finance. It’s designed for ABN holders, including sole traders and companies, using the car mainly for business purposes.

Best for: Self-employed, contractors, and business owners

Key benefits:

• You own the car from day one
  
• Claim GST on the purchase price (if registered)
  
• Potential depreciation and interest deductions
  
• Flexible loan terms (2–5 years)
  

Considerations:

• The car must be used at least 50% for business
  
• You’ll need to supply business financials or choose a low-doc option
  

What Is a Personal Car Loan?

A personal car loan is a straightforward loan for individuals buying a car for private use. It’s typically unsecured or secured against the vehicle and repaid over a fixed term.

Best for: Individuals using the car primarily for personal travel

Key benefits:

• Simple application and approval process
  
• Fixed interest rate and repayments
  
• No business-use requirements
  

Considerations:

• No tax or GST advantages
  
• Interest rates may be higher than business loans or novated leases
  

Side-by-Side Comparison: Which One’s Right for You?

Let Capital Plus Finance Help You Choose

Still unsure whether a novated lease, chattel mortgage, or personal car loan is the best fit? At Capital Plus Finance, we make it easier for you to compare your options and structure repayments that match your situation—whether you’re a business owner, employee, or ABN holder.

With access to over 40 lenders, we can help you:

• Understand eligibility for novated leasing or business finance
  
• Secure low-doc options for self-employed car buyers
  
• Navigate electric vehicle finance and government incentives
  
• Align vehicle funding with your cash flow and tax goals
  

👉 Contact Capital Plus Finance today to talk through your vehicle finance options with a broker who understands your business.

About Capital Plus Finance
Based in Sydney and servicing The Hills Shire and beyond, Capital Plus Finance is an experienced equipment and vehicle finance broker helping Australians secure funding for business vehicles, equipment, and more. Visit capitalplusfinance.com.au to explore all your business finance options.