Read this before the finance manager sits down

Read this before the finance manager sits down

ASIC reviewed more than 350,000 Australian car loans. Some people lost the car and still owed more than they borrowed. The rate on the comparison site is not the rate they get at the desk.

You have already done the hard part. You have picked a car. You know what you can spend. Then someone from “finance” appears, with a smile and a form, and the weekly repayment looks small enough that you stop doing maths.

That room is where a lot of Australian car buyers get hurt. Not because they cannot add. Because the loan is designed to look cheap on the day, and expensive for years.

In June 2026, the corporate watchdog published Report 832, Lifting the bonnet. It looked at eight lenders, including Toyota Finance, Pepper, Latitude, Nissan, Plenti and Rapid Loans. The findings are not a niche story about bad-credit borrowers in the bush. They are a map of how car finance actually works in this country.

The advertised rate is not the deal

As of early August 2026, comparison sites were advertising secured new-car loans from about 5.67% (MoneyPlace and Stratton, with comparison rates around 6.1–6.2%). That is the shop-window price for strong credit and a new car.

ASIC looked at the loans people actually got. Median rates among the eight lenders:

• Toyota Finance (and AAAF): 10%
• Plenti: 10%
• Nissan and Angle Auto: 11%
• Pepper: 13%
• Latitude: 14%
• Rapid: 22%

Rapid’s rate was, in ASIC’s words, “by far the highest across all loans reviewed.”

Those medians already include plenty of ordinary buyers, not just people with wrecked credit. The gap between “from 5.67%” and “22% at the desk” is the whole game.

Holly Reid, a Queensland single mother, told the ABC she took out a $22,000 Rapid loan through a broker at 22%. She pays $339 a fortnight. She has never missed a repayment. She still falls behind on other bills. She did not realise she had been charged almost $5,000 in fees until a financial counsellor walked her through the contract.

“I get a lot of anxiety, especially if I get an extra bill or rego’s up,” she said. “It’s that uncertainty of whether or not I’m going to have enough food to feed the kids.”

Fees get rolled into the loan, so you pay interest on the sting

Almost every loan ASIC looked at came with two establishment fees, added to the amount you borrow:

• A lender establishment fee, typically $299 to $995.
• A distributor fee paid to the dealer or broker, commonly $912 to $1,500, and in some contracts up to $2,500.

You do not write a cheque for those fees. They are capitalised. You pay interest on them for the life of the loan.

Rapid was the outlier. It was the only lender in the review that also charged a “provider fee.” One Queensland customer, given the name Rex in the report, borrowed $49,162 and paid $9,154 in fees: $495 establishment, $1,320 to the broker, and $7,339 as Rapid’s provider fee. That is about 18% of the loan, before a single kilometre.

On Rapid’s cheapest “bronze” tier, that provider fee was later lifted to 15% of the principal. The people charged the most were the ones Rapid had already judged least able to pay: casual work, lower income, shorter terms, smaller loans.

ASIC Commissioner Alan Kirkland called the fees “outrageous.” The regulator cannot set car-loan prices (the legal cap is 48%). What it can do is ask whether the lender actually checked that you could repay a loan once those fees were stuffed into it.

On a $15,000 used car, a $2,000 fee pack is not a rounding error. It is a second-hand hatchback’s worth of extra debt.

They can lend you more than the car is worth

This is the part that does not get explained on the yard.

Lenders get a “book value” for the car from a third-party valuation service. They then lend against it. Across the eight lenders, the average loan-to-value ratio ranged from 94% to 127%.

Read that again. Some loans were for more than the car was worth on day one, once on-road costs and extras were folded in. Distributors often supplied the condition notes that juiced the valuation.

ASIC found the purchase price was often “significantly higher” than the lender-verified book value. That is fine while you keep paying. It is a trap the moment the car has to be sold.

Repossession is rare (0.3% of the 350,000-plus loans). When it happens, it is brutal. Four lenders gave ASIC post-sale balances on 267 repossessed loans. In nearly 90% of those cases, the borrower still owed more than half the original loan after the car was gone. In some cases they owed more than 100%.

ASIC’s own examples (names changed):

• Jasmine, NT: $34,455 loan. Car sold after six months. Still owed $37,299.
• Sebastian, Queensland: $15,678 loan. Sold after eight months. Still owed $20,714.
• Bob, NSW: $23,250 loan. Sold after 18 months. Still owed $23,500.

They lost the car and kept the debt. Kirkland’s line is the one to remember: “Consumers shouldn’t lose their car and still be stuck with the bulk of their debt.”

This is worse in 2026 than it was in 2023. Used values have been falling. AADA/AutoGrab data showed more than half of one-to-five-year-old cars selling below the ask by June, with average days-to-sell stretching to 52 in July. If the balloon or the “guaranteed” residual was set against last year’s prices, the hole at the end of the loan is bigger than the brochure implied.

The small weekly repayment is often a balloon in disguise

Nissan, Angle Auto, Toyota Finance and AAAF all sell guaranteed future value (GFV) loans. Short term, 12 to 48 months. A chunk of the price is parked as a balloon at the end. Your weekly figure looks friendly because you are not actually paying the car off.

To get the guaranteed residual, you usually have to stay under a kilometre cap and hand the car back in “fair wear and tear.” Go over, and the guarantee shrinks. Used values fall, and the balloon can sit above what the car is actually worth. Then you pay the difference, refinance it (often at a worse rate), or sell into a softer market.

ASIC pulled Toyota Finance’s dealer training. Staff were told to introduce GFV “on every single eligible car, 100% of the time.” Modules coached them to overcome “opposition,” including customers who wanted to pay cash, wanted to pay the loan off early, or did not want kilometre limits. In other words: people for whom GFV was a bad fit.

Toyota Finance and AAAF agreed to review sales targets and pull the training ASIC flagged. That is useful. It does not mean the product has disappeared from the yard.

A balloon is not automatically a scam. It can make sense if you know you will trade at a set date, you will keep the kilometres honest, and you have modelled the worst case. It is a problem when it is sold as “the cheap weekly” to someone who just wanted a car they own.

Rapid is the extreme. The pattern is not.

It is tempting to file this under “dodgy lender, don’t use Rapid.” Do that too. Also look at the rest of the table.

• Rapid: 64% of loans had at least one default. 82% of those defaults hit in the first six months. It rejected 53% of hardship applications. In Yarrabah in Far North Queensland, more than 80% of Rapid loans had at least one default.
• Pepper: 11% default rate, thousands of loans.
• Toyota Finance/AAAF: 2% default rate, but 3,830 loans still missed a payment, and the GFV push was theirs.

ASIC’s review was led by its Indigenous Outreach Program because a lot of the complaints came from First Nations consumers. The same mechanics (packed fees, overvalued cars, high-pressure add-ons) show up in suburban dealerships with a Toyota sign out the front.

The Federal Court has already started putting numbers on this. In April 2026, Money3 was ordered to pay $1.55 million for breaching responsible-lending rules on car finance to vulnerable customers. Separate proceedings against other lenders and dealers are on foot. The report is not a thought experiment.

Do this before you sit down

The finance office works because you are tired, you like the car, and walking away feels rude. Walk in with a number from somewhere else and it gets a lot ruder for them.

1. Get a pre-approval from a bank, credit union or an online lender, not the yard. Use the comparison rate, not the headline rate. Check establishment fees, monthly fees, and whether you can pay it out early without a penalty. Canstar’s August 2026 snapshot had secured five-year loans advertised from 5.67%. You will not all get that rate. You will get a rate, in writing, before anyone starts talking about “we can do $149 a week.”

2. Ask for the total amount payable, not the weekly. Interest rate, comparison rate, every fee, balloon or GFV residual, term, and the total you will have repaid if you make every payment on time. If they cannot print that on one page, you are not in a loan conversation. You are in a sales conversation.

3. Make them unbundle the extras. Extended warranty, GAP insurance, paint protection, tyre and rim, loan protection. The ACCC has been onto this for years: a lot of “extra cover” duplicates rights you already have under the Australian Consumer Law if you buy from a dealer. Ask, for each add-on: what does this cover that ACL plus the manufacturer warranty do not? If they cannot answer in a sentence, take it off.

4. Check the car’s value yourself. RedBook, Glass’s, recent sold listings. If the contract price is miles above private-sale comps, you are financing the dealer’s margin and the fees. A 127% LVR only works if nothing goes wrong.

5. PPSR before you sign, even on a dealer car. Two dollars at ppsr.gov.au. Write-off, finance owing, stolen. Do it yourself. Do not take their word.

6. If it is GFV or a balloon, model the ugly ending. What if you do 12,000 km extra? What if used prices are 10% lower in three years (they have been heading that way in 2026)? What if you lose the job and need to hand it back? If the only way the numbers work is the happy path, it is not a cheap loan. It is a deferred argument.

7. Hardship is a legal right, not a favour. If you are already in a car loan and struggling, contact the lender in writing, ask for a hardship variation, and if they stall or refuse, go to AFCA (free) and a financial counsellor via National Debt Helpline on 1800 007 007. ASIC found some collections teams were still ringing people who already had a hardship arrangement in place. That is not something you have to cop.

Sources: ASIC REP 832 (24 June 2026); ASIC media release 26-132MR; ABC News, 24 June 2026; Canstar car loans, August 2026 snapshot; AADA/AutoGrab used-market data, mid-year and July 2026; ACCC second-hand car guidance.

This is general information, not personal financial advice. Loan rates and fees change. Check current figures and your own numbers before you sign.