Chattel Mortgage Calculator

Repayments With a Balloon

A balloon lowers each regular repayment because part of the amount financed is left to repay at the end of the term. The client still pays interest on that part for the whole term. The balloon is then due as a lump sum on top of the regular repayments.

The calculator uses A = (P − B ÷ (1 + r)ⁿ) × r ÷ (1 − (1 + r)⁻ⁿ). P is the amount financed and B is the balloon. The rate per repayment, r, is the annual rate divided by the number of repayments a year, and n is the number of repayments. For repayments in advance, divide A by (1 + r).

In the starting example, a $66,000.00 vehicle with a $6,000.00 deposit and a $500.00 financed fee leaves $60,500.00 to finance. At 8.5% over 60 monthly repayments in arrears, a 30% balloon of $19,800.00 gives a regular repayment of $975.27. Without the balloon, the repayment is $1,241.25.

The lower repayment costs more interest. Total interest is $17,816.45 with the balloon and $13,975.00 without it, a difference of $3,841.45. The last regular repayment is $975.52 because it absorbs cent rounding.

When repayments are in arrears, the balloon falls due on the same date as the last regular repayment and is paid in addition to it. Repayments in advance finish one period earlier, and the balloon is due a full period after that final repayment. A balloon equal to the whole amount financed makes each repayment interest only: $428.54 a month in this example, with the full $60,500.00 still owed at the end.

A balloon is a debt the client must repay, not a promise about what the vehicle will be worth. Moneysmart's car loan guide describes a guaranteed future value as a separate loan feature with its own conditions, such as a kilometre limit. Plan how the client will pay the balloon before choosing its size.

Finance Cost and GST

The finance cost of a chattel mortgage is the interest charged on the amount financed. Whether the client can claim GST or a tax deduction is a separate question, so this calculator leaves both out. It treats the vehicle price you enter as the amount paid, including any GST.

The cost breakdown keeps each figure apart. The vehicle price is the cash price, and the deposit is paid upfront. The amount financed is the price less the deposit, plus financed fees. Total interest is what the lender charges on that amount over the term, and the balloon is the part of the amount financed repaid at the end.

Financed fees are principal, so they appear once in the amount financed and never in total interest. For the starting example, the client pays the lender $78,316.45: the $60,500.00 amount financed plus $17,816.45 of interest. Adding the $6,000.00 deposit gives $84,316.45.

Under the ATO's rules for purchasing a motor vehicle, a GST-registered business using the vehicle solely for business can generally claim the GST in the price if it holds a tax invoice. Partial business use generally means a partial credit. For a car priced above the car limit, the credit is capped at one-eleventh of that limit. Commercial vehicles not designed mainly to carry passengers are among the exceptions to that cap.

A GST credit comes back through the business activity statement, not through the loan. It does not reduce the amount financed or the scheduled repayments. A lease works differently. Under a lease, a business may be entitled to a credit for the GST in each lease payment, and the car limit does not cap that credit.

The ATO's list of deductible motor vehicle expenses includes interest on a motor vehicle loan and depreciation. Only the business-use percentage is claimable, and the client must be able to support that percentage with records. The schedule's interest column shows how the interest falls across the term.

Comparing a Vehicle Finance Quote

To compare a quote from Stratton Finance, ANZ or another lender or broker, enter the quote's vehicle price, deposit, financed fees, rate, term, frequency, timing and balloon. If the regular repayment here matches the quote within a few cents, both use the same structure. Stratton Finance is an asset finance broker that arranges loans from a panel of lenders, while ANZ lends directly.

A larger gap means one of the quote's assumptions differs. Common causes are fees added to the loan, a monthly account fee included in the quoted repayment, repayments in advance or a balloon measured against a different amount. Change one input at a time until the repayment matches.

As a hypothetical example, suppose a quote for the starting vehicle shows $990.00 a month over 60 months with the same $19,800.00 balloon. This calculator gives $975.27 at 8.5% in arrears, so the quote costs $14.73 a month more, or $883.80 over the term. If the quote adds no fees you have not entered, a rate of about 8.91% produces the quoted repayment.

To check a quote in a spreadsheet, Excel's PMT function takes the same inputs. For the starting example, =PMT(8.5%/12, 60, 60500, -19800) returns −$975.27, shown as negative because it is a payment. Add a final argument of 1 for repayments in advance.

Compare quotes on the total paid to the lender and the balloon as well as the regular repayment. A lower repayment with a larger balloon can cost more interest, as the comparison table shows.