What each structure actually means
When NZ business owners talk about financing a vehicle or piece of equipment, two structures come up most often: a term loan (also called a chattel mortgage) and a finance lease. They look similar from a distance — fixed monthly payments, set terms — but the mechanics are meaningfully different, and choosing the wrong one has real tax and cashflow consequences.
Term loan (chattel mortgage)
A chattel mortgage is the most common asset finance structure for NZ businesses. You borrow money to purchase an asset, the lender registers a security interest over the asset on the Personal Property Securities Register (PPSR), and you repay the loan in fixed monthly instalments. You own the asset from day one. When the loan is repaid, the security interest is discharged and the asset is yours outright.
The term "chattel mortgage" comes from older property law — "chattel" simply means a moveable physical asset as opposed to real estate. In modern NZ commercial lending, the terms chattel mortgage, term loan, and equipment loan are largely interchangeable.
Finance lease
Under a finance lease, the lender (lessor) purchases the asset and leases it to your business (lessee) for an agreed term. You make regular lease payments for the right to use the asset. At the end of the term you typically have three options: purchase the asset for a pre-agreed residual value, return the asset to the lessor, or refinance the residual into a new agreement.
During the lease term, the lessor is the legal owner of the asset — not your business. This has important implications for GST, depreciation, and the Investment Boost.
Don't confuse a finance lease with an operating lease. An operating lease is typically shorter-term, includes maintenance, and doesn't transfer ownership risks — it's closer to a rental. A finance lease is longer-term and structured to transfer substantially all the risks and rewards of ownership to the lessee.
Side-by-side comparison
| Feature | Term loan (chattel mortgage) | Finance lease |
|---|---|---|
| Who owns the asset? | You, from day one | Lender (lessor) during the term |
| Monthly payments | Fixed principal + interest | Fixed lease payments |
| Residual / balloon | Optional — can structure with or without | Common — set at outset, due at end of term |
| GST on purchase | Claimed upfront on full purchase price | Claimed proportionally on each payment |
| Depreciation claim | Your business claims depreciation | Lessor claims depreciation (not you) |
| IRD Investment Boost | Available to your business on qualifying assets | Complex — lessee typically follows depreciation entitlements, but confirm with your accountant |
| Balance sheet treatment | Asset + liability on balance sheet | Right-of-use asset + lease liability (IFRS 16) |
| End of term options | Asset owned outright | Buy, return, or refinance residual |
| Early termination | Break costs may apply | Break costs typically apply — can be significant |
| Best for | Most NZ business purchases in 2026 | Specific cashflow or balance sheet requirements |
GST and tax treatment in NZ — where the real difference lies
This is the area most frequently misunderstood, and where the choice of structure has the biggest financial impact.
GST under a term loan
If your business is GST-registered and you purchase an asset using a chattel mortgage, you can claim the full GST component of the purchase price on your very next GST return. On a $90,000 (GST-inclusive) vehicle, that's approximately $11,739 back — arriving in your bank account within weeks of settlement, regardless of how long you've still got left on the loan.
GST under a finance lease
Under a finance lease, GST is charged on each lease payment as it's made. You can only claim the GST on each payment in the return period it's paid. This means the GST benefit is spread over 3, 4, or 5 years rather than received upfront. The total GST claimed is the same, but the timing is significantly different — which has real cashflow implications, particularly for capital-intensive purchases.
Depreciation
Under a chattel mortgage, your business owns the asset and claims depreciation against your taxable income each year. Under a finance lease, the lessor owns the asset and claims the depreciation — not your business. Your deduction under a finance lease is the lease payment itself, not depreciation.
For most NZ small and medium businesses on a straightforward tax return, claiming depreciation under a term loan is simpler and typically more beneficial. The difference matters most for businesses with specific balance sheet or tax structuring requirements — which is a conversation for your accountant.
The Investment Boost factor — important for both structures
Since May 2025, the IRD has allowed eligible NZ businesses to claim a 20% upfront deduction on the cost of new qualifying assets in the year of purchase — on top of regular depreciation. This is the Investment Boost, and it's one of the most significant tax incentives available to NZ business owners right now.
Under a chattel mortgage, the position is clear: your business owns the asset from day one, you are the depreciating party, and the Investment Boost is yours to claim on qualifying assets.
Under a finance lease, the position is more nuanced. Under NZ tax rules, the lessee (your business) generally follows the depreciation entitlements for a finance lease — meaning you may still be able to claim the Investment Boost as lessee. However, CA ANZ has flagged that the interaction between the Investment Boost and finance lease structures has known legislative complexity. This is not a simple yes/no area — get your accountant to confirm the position before structuring a significant purchase as a finance lease specifically to access the boost.
What is clear regardless of structure: the Investment Boost only applies to assets that are new or new-to-New Zealand. Second-hand assets traded within NZ do not qualify.
For most NZ businesses buying new qualifying assets in 2026, the combination of upfront GST recovery and the clear-cut Investment Boost claim makes a chattel mortgage the simpler and typically superior structure. The finance lease Investment Boost position requires specific accounting advice. Always confirm your situation with your accountant before deciding.
Which structure suits which situation
Despite everything above, there are situations where a finance lease remains the right choice. Here's an honest guide:
| Your situation | Better structure | Why |
|---|---|---|
| Buying new equipment and want maximum tax benefit in year one | Term loan (chattel mortgage) | Investment Boost + upfront GST claim |
| Buying a work vehicle and want to own it outright at the end | Term loan (chattel mortgage) | Ownership from day one, no residual risk |
| Want lower monthly payments and plan to upgrade the asset at end of term | Finance lease with residual | Residual reduces payments; return or upgrade at term end |
| Business is not GST-registered | Either — GST timing difference is irrelevant | Focus on rate and term instead |
| Specific balance sheet requirement (e.g. keeping debt ratios low) | Finance lease (IFRS 16 applies — ask your accountant) | Different balance sheet presentation under some reporting frameworks |
| Buying second-hand equipment (Investment Boost doesn't apply) | Either — assess on rate and cashflow | Main differentiator (Investment Boost) is removed |
If you're unsure which structure is right for your situation, the honest answer is to talk to both your accountant (for the tax implications) and a finance broker (for the lender options and pricing). Getting this wrong upfront is harder to fix mid-term, particularly with a finance lease where early exit costs can be significant.
Common questions
Not sure which structure suits you?
Nick can walk you through the options for your specific asset, business type, and tax situation — and recommend the right structure before you commit to anything.