In short: On a $99,000 truck with a $9,000 deposit, financed at 8.00% p.a. over five years with a 20% balloon, you finance $90,000, repay $1,580 a month and owe an $18,000 balloon at the end. Total repaid is $112,794 and total interest $22,794. Without the balloon the repayment is $1,825 and interest $19,493, so the balloon costs $3,301 more.
- Amount financed$90,000
- Balloon due at the end$18,000
- Total repaid with the balloon$112,794
- Total interest with the balloon$22,794
- Repayment with no balloon$1,825/mo · $19,493 interest
- Extra interest cost of the balloon$3,301
- GST in the purchase price$9,000
For a GST-registered business on a cash basis, the GST shown may be claimable as an input tax credit in your next BAS under a chattel mortgage. Confirm the tax treatment with your accountant or at ato.gov.au. Balloon limits are set by each lender and, for leases, by ATO minimum residual rules.
Monthly repayment: $1,580
That is a general estimate on standard assumptions. Every lender applies its own expense benchmarks, income shading and policy, so the real figure moves from lender to lender. Gorakh spent years as a senior credit officer deciding exactly these questions. Send him the numbers above and he will tell you what is realistic and which lenders fit — at no cost to you for home loans.
- A former senior credit officer reads itGorakh assessed loan applications on the lender side before he became a broker.
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A balloon buys cashflow now and charges you for it later. This calculator shows exactly how much of each, so the decision is made on numbers rather than on the monthly figure a dealer quotes you.
How this calculator works
Enter the asset price including GST, your deposit or trade-in, the interest rate, the term and the balloon as a percentage of the amount financed. The tool returns the amount financed, the balloon in dollars, the monthly repayment, the total repaid and total interest, the equivalent no-balloon repayment, and the GST contained in the purchase price.
Amount financed
Price less deposit or trade-in. GST-registered buyers usually finance the full GST-inclusive price and claim the GST back separately, which is why the figure here is the inclusive one.
Balloon or residual
A lump sum left owing at the end of the term. Because you only pay interest on it rather than paying it down, the monthly repayment falls. Lenders set their own maximum balloon, generally scaled to the term and to the age and type of the asset, and finance leases are also subject to ATO minimum residual guidelines. Long terms and older assets attract lower maximum balloons.
What the balloon actually costs
| 20% balloon | No balloon | |
|---|---|---|
| Amount financed | $90,000 | $90,000 |
| Monthly repayment | $1,580 | $1,825 |
| Balloon due at the end of year 5 | $18,000 | Nil |
| Total repaid | $112,794 | $109,500 |
| Total interest | $22,794 | $19,493 |
The balloon saves you $245 a month, which over 60 months is $14,700 of cashflow you keep. In exchange you owe $18,000 in a single payment at the end and you pay $3,301 more interest, because $18,000 of principal sat there earning interest for the whole five years instead of being paid down.
Whether that is a good trade depends on one question: what will the asset be worth when the balloon falls due? If a five-year-old truck is comfortably worth more than $18,000, the balloon is manageable. If it will be worth less, you have engineered a shortfall you must fund from cash.
GST and the tax side
On a $99,000 GST-inclusive purchase the GST component is $9,000. Under a chattel mortgage the business takes ownership of the asset from day one, so a GST-registered business is generally entitled to claim that $9,000 as an input tax credit, and a business accounting for GST on a cash basis can usually claim the full amount in the BAS for the period in which the asset is purchased rather than spreading it across the term.
Interest and depreciation are then typically deductible to the extent the asset is used for business. The exact treatment depends on your registration, your accounting basis, the structure you choose and how the asset is used, so confirm it with your accountant and check the current rules at ato.gov.au before relying on any of it.
Chattel mortgage, finance lease or commercial hire purchase
| Structure | Who owns the asset | GST treatment, in general terms | Typically suits |
|---|---|---|---|
| Chattel mortgage | You, from settlement, with the lender taking a security interest | GST on the purchase price claimable up front by a GST-registered business | Most GST-registered businesses buying a vehicle, truck or plant they intend to keep |
| Finance lease | The financier, with you leasing it and a residual set at the end | GST is charged on the lease payments and claimed as you go | Businesses wanting the payment treated as a rental and off the asset register |
| Commercial hire purchase | The financier, with title passing to you at the end of the term | GST on the purchase price, with the timing depending on your accounting basis | Businesses that want ownership at the end but prefer the hire purchase mechanics |
The choice affects your balance sheet, your BAS and your tax return, so it belongs in a conversation with your accountant and your broker rather than on a dealer's finance form. Our asset and equipment finance page compares them in depth, and business loans covers working capital.
Worked example
A Craigieburn transport operator buys a prime mover listed at $99,000 including GST. She trades in her old rigid for $9,000 and finances $90,000 at 8.00% p.a. for illustration over five years with a 20% balloon.
- Amount financed: $99,000 less $9,000 equals $90,000.
- Balloon: 20% of $90,000 equals $18,000, due at the end of month 60.
- Monthly repayment: $1,580.
- Total paid: $1,580 times 60 months, plus the $18,000 balloon, equals $112,794.
- Total interest: $112,794 less $90,000 equals $22,794.
- GST in the price: $99,000 divided by 11 equals $9,000, claimable as an input tax credit under a chattel mortgage if she is registered for GST.
She budgets $1,580 a month against contract revenue. At the end of year five she can pay the $18,000 out, refinance it over a further term, or sell the truck and use the proceeds. Because a five-year-old prime mover with reasonable kilometres should sell comfortably above $18,000, the balloon is a sensible cashflow decision rather than a deferred problem.
The bit people miss: it affects your home loan
Every dollar of asset finance repayment is a commitment on your credit file, and a home loan assessor will subtract it from your surplus. A $1,580 monthly truck repayment reduces home loan borrowing power by roughly $180,000 to $220,000 depending on the lender's assessment method.
If you plan to buy or refinance a home within two years, sequence matters: get the pre-approval in place first where you can, or at least discuss timing before signing. The borrowing power calculator shows the effect, our guide for truck drivers and transport operators covers how lenders read this scenario, and self-employed loans explains the income evidence required.
Frequently asked questions
What is a balloon payment on asset finance?
A lump sum left owing at the end of the finance term, set as a percentage of the amount financed. Because you do not pay that portion down over the term, the monthly repayment is lower, but interest accrues on it for the whole period. At the end you pay it out, refinance it, or sell the asset and clear it from the proceeds.
Does a balloon payment save money?
No. It lowers the monthly repayment and increases the total cost. On a $90,000 five-year facility at 8.00% p.a., a 20% balloon cuts the repayment from $1,825 to $1,580 but adds $3,301 in interest and leaves $18,000 owing at the end. It is a cashflow tool, not a saving.
Can I claim the GST on a chattel mortgage?
A GST-registered business is generally entitled to claim the GST in the purchase price as an input tax credit, because a chattel mortgage gives you ownership from the outset. On a cash accounting basis it can usually be claimed in full in the BAS for the relevant period. Confirm the position with your accountant and check the current rules at the ATO.
What is the difference between a chattel mortgage and a car loan?
A chattel mortgage is a business facility for an asset used predominantly for business, with the tax and GST treatment that follows. A consumer car loan is regulated credit for a personal vehicle, with different disclosure and hardship protections and no input tax credit. Which one applies depends on the asset's use, not on what you would prefer.
What happens if I cannot pay the balloon?
You generally have three options: pay it from cash, refinance it over a further term, or sell the asset and clear it from the proceeds. Refinancing is usually possible, though the rate on an older asset is higher and the term shorter. The real risk is the asset being worth less than the balloon, which is why an oversized balloon on a fast-depreciating asset is worth avoiding.
Talk to GNT Finance
Dealer finance is convenient and rarely the sharpest option. Gorakh Timilsina can compare asset finance across our panel, structure the balloon so it matches what the asset will realistically be worth, and make sure it does not quietly cost you a home loan approval next year.
Book a free consultation or call 0426 403 703.
This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.