The Numbers Are Uncomfortable — But They're Real
Fresh research published in 2026 found that 28% of Australians took out a car loan that wasn't suitable for them, citing unexpected fees, pressure from salespeople, or rushing into debt without fully understanding what they were signing. That's not a rounding error. That's more than 1 in 4 people sitting in a car they love, paying for a loan they regret.
And it gets worse for younger buyers. 54% of Gen Z borrowers report regretting their car loan choice, compared to just 12% of Baby Boomers. If you're under 35 and financing a car right now, the odds are not in your favour — unless you know what to look for.
Why Does This Keep Happening?
The research points to three main culprits, and none of them are surprising if you've spent five minutes in a dealership.
- 47% of people with car loan regrets trusted the salesperson to choose the loan for them — and later wished they hadn't.
- 35% didn't compare other lenders before signing.
- 23% said the loan terms or fees weren't clearly explained to them.
Here's the thing: a car salesperson is not a financial adviser. Their job is to sell you a car and, ideally for them, arrange the finance too. Dealer-arranged finance is frequently 2–4% higher in interest rate than what an independent lender or broker can offer. On a $30,000 loan over five years, that gap alone can cost you between $3,000 and $6,000 extra in interest — money that vanishes from your pocket the moment you drive off the lot.
The Average Rate Australians Are Actually Paying
The ads make car finance look cheap. Reality is different. The lowest advertised secured car loan rate in Australia right now sits around 5.66% p.a. — but that's the best-case headline figure, usually reserved for borrowers with excellent credit and large loan amounts. The actual average rate paid across all car loans in Q1 2026 is 8.92% p.a. If you finance through an unsecured personal loan — which many Australians do without realising it's a different product — the average climbs even higher to 13.87% p.a.
That gap between the advertised rate and what most people actually pay is where thousands of dollars get quietly lost. And most buyers never notice, because they're focused on the weekly or monthly repayment number — not the total amount they'll hand over across five years.
Secured vs. Unsecured — The Choice That Changes Everything
One of the most overlooked decisions in car finance is whether your loan is secured or unsecured. Most people don't choose — it just happens to them.
A secured car loan uses the vehicle as collateral. Because the lender can repossess the car if you default, they take on less risk — and pass some of that benefit to you in the form of a lower rate. Secured rates for new cars currently run around 6.9% to 8.2% p.a. for most borrowers.
An unsecured car loan is effectively a personal loan used to buy a car. There's no collateral — so lenders charge more. Much more. The difference in rate between secured and unsecured can be 3–5% per year. On a $45,000 loan, choosing unsecured over secured can cost you over $11,000 more in interest over five years. That's a holiday. That's a home deposit contribution. That's real money.
Older vehicles often force buyers into unsecured loans because lenders won't accept cars older than 7–12 years as security. This is worth knowing before you fall in love with a used car you've found online.
The Repossession Reality Nobody Talks About
Car loan defaults are climbing in Australia. Repossession volumes have risen sharply, driven by cost-of-living pressure, higher interest rates, and declining used car values that make it harder for stretched borrowers to refinance their way out of trouble. Regulator data shows that nearly half of consumers who defaulted on car finance did so within the first six months of taking out the loan — meaning the problem was baked into the loan from the start, not caused by some later financial shock.
And here's the part that should make anyone pause: among repossessed vehicles that were sold, almost 90% of borrowers still owed more than half of their original loan balance. The car gets taken. The debt largely stays. That's the real cost of getting into the wrong loan.
Five Things to Do Before You Sign Anything
- Get pre-approved before you go to the dealer. Walking in with a pre-approval from an independent lender or broker puts you in control. The dealer can still compete — but now you have a benchmark.
- Compare the comparison rate, not the headline rate. The comparison rate includes fees and gives you a truer picture of what you'll actually pay. A loan with a low headline rate but high fees can cost more than a slightly higher-rate loan with no fees.
- Know your loan type before you sign. Is it secured or unsecured? Fixed or variable? Does it have a balloon payment or a GFV at the end? Ask directly. Demand a straight answer.
- Don't let time pressure make the decision. EOFY deals, end-of-month targets, limited stock warnings — these are sales tactics. A loan you'll carry for five years is worth a day of your time to research properly.
- Ask what you'll walk away with at the end. On a standard car loan, you keep the car. On a GFV or balloon loan, you may owe a lump sum — or hand the car back and get nothing. This is the part most people discover too late.
What Good Car Finance Actually Looks Like
The best car finance product is one where you clearly understand the total cost before you sign, your weekly payments fit your real budget (not your stretch budget), and you're not left holding the bag — financially or literally — when the loan ends.
Most standard car finance products in Australia are structured to benefit the lender, not the borrower. You pay interest on a depreciating asset, and at the end you either own a car that's lost most of its value, or you owe a lump sum that forces you to refinance or sell. There's a better way to think about this — and it starts with asking the right questions before you ever sit down across a desk from someone who earns commission on what you sign.
That's exactly what Milam was built to fix. We give customers lower weekly payments and an equity payout when they return the car — so you're not just spending, you're building something back. Speak to a financial adviser to understand which car finance structure suits your personal situation before committing.
Nearly half of Australians who defaulted on car finance did so within the first six months — meaning the loan was the problem from day one, not something that went wrong later. Getting into the right loan matters more than getting into a car quickly.