Australians love their cars. We also love financing them — and paying significantly more for them than the sticker price suggests. Here's a clear-eyed look at what car loans are actually costing in 2025.
The average Australian car loan
The average new car in Australia costs around $40,000–$45,000. Most Australians finance the majority of this — around 50–60% of new car purchases involve some form of finance. A typical setup:
- Loan amount: $35,000 (after deposit)
- Interest rate: 7–9%
- Loan term: 5 years
- Monthly repayment: approximately $680–$730
Over 5 years, that's roughly $41,000–$44,000 paid back on a $35,000 loan — meaning $6,000–$9,000 in interest alone.
The real cost nobody talks about: depreciation
Interest is just the start. A new car loses value the moment you drive it off the lot:
- Year 1: 15–25% of its value
- Years 2–3: 10–15% per year
- Year 5: worth approximately 40–50% of its original price
On a $45,000 car, that's a depreciation hit of $20,000–$25,000 over 5 years. Add that to the interest paid, and the true cost of owning that car is closer to $30,000 above the purchase price.
Interest rates: what Australians are actually being charged
| Loan type | Typical rate range (2025) |
|---|---|
| New car, excellent credit | 5.5%–7.5% |
| New car, average credit | 8%–11% |
| Used car (under 5 years) | 7%–12% |
| Used car (over 5 years) | 10%–18% |
| Unsecured personal loan | 10%–20% |
| Dealer finance (advertised) | 2%–4% (often inflated purchase price) |
The dealer finance trap
Many Australians see "2.9% finance" and assume they're getting a great deal. Often, they're not. Dealer finance offers are frequently structured so the discount comes from a higher purchase price, fees built into the loan, or a surprise balloon at the end.
Always ask for the comparison rate — which includes fees — before signing. The comparison rate is almost always significantly higher than the advertised rate.
What does a 1% rate difference actually mean?
On a $35,000 loan over 5 years, each 1% costs roughly $1,100 extra. It's worth shopping around.
| Rate | Total repaid | Interest cost |
|---|---|---|
| 7% | ~$41,580 | $6,580 |
| 8% | ~$42,660 | $7,660 |
| 9% | ~$43,770 | $8,770 |
The weekly repayment view
| Loan amount | Rate | Term | Weekly repayment |
|---|---|---|---|
| $30,000 | 7% | 5 years | ~$140 |
| $40,000 | 7% | 5 years | ~$187 |
| $50,000 | 8% | 5 years | ~$243 |
For many Australians paying $500–$700/week in rent, the car repayment is their second-largest weekly expense. Worth treating it with the same seriousness.
How to reduce your car finance cost
- Improve your credit score before applying — even moving from 11% to 8% saves thousands
- Use a broker, not just the dealer's finance team — brokers compare across lenders
- Consider the loan structure, not just the rate — a GFV loan via products like Milam lowers repayments and removes depreciation risk
- Put more deposit in — every extra $3,000 upfront can save more than that in interest
- Match the term to your ownership plans — if you upgrade in 3 years, don't sign a 5-year loan
There's a smarter way to finance your car.
Milam is building car finance that gives you lower repayments and rewards you when you return the car.
Join the waitlist