Australia Is Buying EVs in Record Numbers While Rates Are Rising. Pick the Wrong Finance and You'll Pay for Both.

The Numbers Are Stunning — and That's Exactly When You Need to Be Careful

Let's start with the headline facts, because they are genuinely remarkable. In June 2026, full EVs and plug-in hybrids reached 35.8% of new passenger car sales in Australia, with full EVs making up one in every four cars sold. At the same time last year, EVs accounted for only 11% of new vehicle sales. That's not a trend — that's a structural shift happening in real time.

And it's not just Tesla. BYD has surged 112.6% in the first half of 2026 and now leads the EV segment, while brands like Zeekr and Omoda Jaecoo are posting year-on-year growth in the thousands of percent. For the first time in Australian history, China has overtaken Japan as the country's most prolific car supplier.

Here's the problem: the finance industry has not moved anywhere near as fast as the showrooms. And when you're excited about a shiny new EV, that lag costs you money.

Interest Rates Are Still Climbing — and Car Loans Are Feeling It

While EV adoption has exploded, the rate environment has gone in exactly the wrong direction for borrowers. The RBA has delivered three consecutive hikes since February 2026, pushing the cash rate to 4.35%. Car loan rates have followed. The average car loan rate has risen to 7.67% p.a. as of July 2026 — up more than 0.50 percentage points in just six months. For borrowers with anything less than clean credit, the average rate sits at 13.74% p.a.

Across all borrower types, the average car interest rate in Q1 2026 sat at 8.92%. On a $46,055 loan — the average for a new car — that's a serious amount of interest over a standard five-year term.

Here's what most people don't realise: car loan rates are not directly pegged to the RBA cash rate the way variable home loans are. The cash rate influences wholesale funding costs for lenders, which indirectly affects car loan pricing — but lenders also make their own decisions based on competition, credit risk, and margin targets. That means you can't just wait for an RBA cut and expect your dealer's finance offer to automatically improve.

The Dealer Finance Trap Is Still Running — ASIC Proved It

In June 2026, ASIC released Report 832 after examining data from over 350,000 car loans across eight of Australia's largest car finance providers. What they found should make any car buyer uncomfortable. Some borrowers were paying establishment fees of up to $9,000 on a single loan. Nearly half of those who defaulted did so within the first six months. And 90% of repossessed borrowers still owed more than half their original loan balance after their car was sold.

ASIC identified shortcomings in some lenders' oversight of distributors like brokers and car dealers who sell their loans, exposing consumers to harm. Commissioner Alan Kirkland was blunt: some lenders are not paying enough attention to the impact of their practices on consumers.

Dealer finance is convenient. It is also typically priced 1.5 to 3 percentage points above the rate the same borrower could access through a broker or by going direct. On a $46,000 loan over five years, 2 extra percentage points costs you roughly $4,800 in additional interest. That's not a rounding error. That's a holiday, a year of groceries, or a meaningful chunk of your mortgage offset.

The EV Depreciation Trap: The Number Your Dealer Isn't Talking About

Now layer in the factor that makes EVs specifically dangerous when paired with bad finance: depreciation. EVs in Australia have been depreciating faster than petrol cars. AADA and AutoGrab data showed EVs losing around 25% of their value in the first year, against 11.5% for petrol cars. Two-year-old Tesla Model 3s were retaining around 54% of their original price in late 2025, and the MG4 was sitting at just 50%.

Why does this matter for your finance contract? Because fast depreciation and a fixed balloon payment is the classic recipe for negative equity. If you finance an EV with a balloon payment set at, say, 30% of the purchase price — and the car is actually worth 22% of its original value by the time the loan ends — you owe more than the car is worth. You either refinance the gap, pay it in cash, or you're stuck.

For novated lease holders, the ATO sets minimum residuals: 65.63% after one year, 46.88% after three years, and 28.13% after five years. Those figures are calculated on the original purchase price. If the actual market value of your EV falls below those numbers, you are liable for the difference — and that payout comes from post-tax dollars, with GST on top. That detail surprises a lot of people at the end of their lease.

The Five Questions You Need to Answer Before You Sign Anything

• What is the comparison rate — not just the headline rate? The comparison rate folds in fees and charges and gives you a truer picture of the loan's cost. A 5.99% headline rate can easily become 8.5% once fees are included.
• Is there a balloon or residual payment, and what does the car actually need to be worth to break even? Look at real used-car prices for 3–5 year old versions of the model you're buying today. That's your benchmark, not the dealer's optimistic residual projection.
• What are the total establishment fees? ASIC found fees as high as $9,000 on a single loan. Ask for the fee schedule in writing before you agree to anything.
• Are you being offered dealer finance without being shown alternatives? You are not obligated to take the finance the dealer offers. You can walk out, organise pre-approval elsewhere, and come back. The car will still be there.
• How does this loan interact with your other debt? From February 2026, APRA requires banks to limit new home lending at a debt-to-income ratio of six or more to just 20% of new mortgages. A large car loan balloon sitting on your books can affect your ability to refinance or buy property.

What a Better Structure Actually Looks Like

The core problem with most car finance — EV or otherwise — is that it's designed to look affordable while extracting maximum value from you over time. Low weekly payments hide high total costs. Balloon payments make the monthly number attractive while burying a lump-sum liability at the end. Establishment fees get folded into the loan so you don't feel them. And dealer finance margins stay invisible because you never see the rate the lender originally offered.

A genuinely better structure does the opposite. It gives you lower regular payments and transparency about what happens at the end of the term. It doesn't leave you holding a depreciated asset with a loan balance that's bigger than what the car is worth. And it doesn't disappear a potential equity gain into the lender's pocket.

That's the gap Milam was built to close. Instead of making your payments disappear into a standard GFV loan with nothing to show at the end, Milam gives you lower weekly payments and an equity payout when you return the car — meaning if the vehicle is worth more than the guaranteed future value, you get that upside back, not the lender. It's the kind of structure that actually makes sense in a market where EVs are appreciating in demand even as some models depreciate in price.

The Market Is Moving Fast. Your Contract Shouldn't Trap You.

The pace of change in Australia's car market is extraordinary. Chinese brands are rewriting the sales charts. EVs are going mainstream faster than anyone projected. And interest rates, while potentially stabilising, remain at levels that make expensive finance genuinely painful.

In this environment, the finance structure you choose matters more than ever. A bad contract locks you into a rate that doesn't reflect your creditworthiness, a balloon that doesn't reflect your car's actual future value, and fees that never should have been charged in the first place. A good one gives you flexibility, transparency, and — ideally — something back at the end.

Before you sign anything, speak to a financial adviser who can model the total cost of each option across the full loan term, including the end-of-term payout. The weekly payment is just the beginning of the conversation.