The RBA Has Been Cutting Rates. So Why Is Your Car Loan Still Expensive?

First, What's Actually Happening With Rates Right Now

The RBA has been cutting the cash rate through 2025 and into 2026, bringing gradual relief to Australian borrowers after a punishing rate-rise cycle. Mortgage rates have responded, at least partly. Car loan rates? Not so much.

Here's the number that should stop you mid-scroll: the average fixed-term car loan rate in Australia — including dealer finance — sits at 9.06% p.a. according to Reserve Bank data. Meanwhile, the lowest secured car loan rates available on the open market right now start from around 5.66% p.a. That's a gap of more than three percentage points. On a $45,000 loan over five years, that difference costs you roughly $4,200 in extra interest. Not a rounding error. Real money.

So what's going on? Why are some Australians paying 9% when others are paying under 6%? And why haven't rate cuts fixed this?

Car Loans Don't Work Like Mortgages

When the RBA cuts rates, your variable mortgage rate typically drops within weeks. Your bank makes a media announcement. The Treasurer says something cheerful. But car finance doesn't work that way.

Here's why:

• Most car loans are fixed-rate. Once you sign, your rate is locked in regardless of what the RBA does. There's no automatic pass-through of rate cuts. If you signed at 10% in 2024, you're still paying 10% today.
• Dealer finance is priced differently. When you finance through a dealership, the dealer acts as a distributor for a lender — and they often earn a commission based on the rate they charge you. The higher your rate, the more the dealer earns. ASIC has been raising concerns about exactly this structure, including in its June 2026 report, REP 832 Lifting the Bonnet.
• Car loan lenders carry higher default risk. Cars depreciate fast, repossession is messy, and lenders price that risk into their rates. Even when the RBA cuts, lenders don't rush to reduce car loan margins.
• The market lacks transparency. Research shows that less than a third of Australians feel confident comparing and selecting a car loan without professional help. That low confidence hands the pricing power to lenders and dealers — not you.

The Window You're In Right Now (July 2026)

Here's the unusual opportunity sitting in front of Australian car buyers right now — and it won't last long.

Rate cuts improve buyer affordability, but the price effect on the used car market lags behind. Dealers and private sellers don't immediately raise prices the moment the RBA cuts — it typically takes three to six months for increased buyer demand to flow through into higher prices on the listings market.

That means right now, in July 2026, you have lower finance costs AND used car prices that haven't yet fully absorbed the demand stimulus from cheaper money. If you're ready to buy, this is a genuine window. But — and this matters — only if you don't blow the advantage by accepting a high-rate dealer loan that wipes out every dollar of saving you'd gain from lower prices.

Average new car prices in Australia now sit between $45,000 and $60,000 depending on brand and type. Monthly repayments on a typical financed car sit around $710 a month — roughly $164 a week. At 9% instead of 6%, you're adding hundreds of dollars per month for the life of the loan. The RBA's gift to you disappears if the dealer's finance desk takes it back.

What ASIC Found When They Looked Under the Bonnet

ASIC's June 2026 report, REP 832, didn't pull punches. The regulator identified serious concerns about third-party distributor arrangements — which is industry-speak for dealerships selling finance — and how consumer outcomes are being monitored (or not). This came on top of a Federal Court ordering Money3 Loans to pay $1.55 million in penalties for breaching responsible lending obligations when providing car finance to vulnerable consumers. Separately, the Court found that Diamond Wheels Pty Ltd and Keo Automotive provided car loans without a credit licence and charged unlawful and excessive interest.

These aren't edge cases. They're symptoms of a market where too many Australians don't know their rights, don't compare rates, and end up in loans that were never in their best interest. Research shows that nearly half of borrowers who regret their car loan did so because they relied on the salesperson at the dealership to guide them on the finance — and more than a third didn't compare other lenders before deciding.

Why Your Car Loan Rate Is Probably Higher Than It Should Be

Let's be direct. If you got your car loan through the dealer's finance office, there's a good chance you're paying more than you need to. Here's the playbook that gets used on Australian buyers every day:

• The focus on weekly repayments. Dealers quote your payment as a weekly number to make it sound small. But stretch a loan to seven years at a high rate and you'll pay tens of thousands more than the car is worth.
• The inflated rate, quietly marked up. Dealers receive a wholesale rate from the lender and can — in some cases — charge you more. The margin goes into their pocket, not yours.
• The add-on products packaged into the loan. Extended warranties, tyre insurance, paint protection — all rolled into the loan, all earning interest, all eating into your budget.
• The urgency close. 'This rate is only available today.' It usually isn't. Urgency is manufactured to stop you comparing.

What To Do Right Now

The good news: the window is open, and with a bit of preparation, you can actually benefit from the current rate environment rather than handing the gains to a dealer.

• Get pre-approved before you set foot in a dealership. Apply to a bank, credit union, or online lender before you go shopping. When you know your approved rate, the dealer's finance desk loses its leverage.
• Compare the comparison rate, not the headline rate. The comparison rate includes fees and gives you a more honest picture. A loan advertised at 6.99% with a comparison rate of 9.5% has serious hidden costs baked in.
• Check your credit score first. Your score directly determines what rate you'll be offered. Lenders reserve their sharpest rates for borrowers with excellent credit history. A few months of good financial behaviour before you apply can meaningfully improve your outcome.
• Consider the total cost, not the weekly number. Calculate the total amount payable over the full loan term. That's the honest number. Everything else is a distraction.
• If you're a small business owner, talk to your accountant. The $20,000 instant asset write-off is now permanently legislated from 1 July 2026 for businesses with turnover under $10 million. For eligible commercial vehicles, that changes your finance decision significantly. Speak to a financial adviser about what works for your situation.

What Makes Milam Different

Milam was built because the standard car finance model — where you make payments for years and walk away with nothing — doesn't add up. With Milam, you get lower weekly payments than a standard loan on the same car, plus an equity payout when you return the vehicle. You're not just paying off someone else's asset. You're building a return for yourself.

In a market where rate cuts haven't fully flowed to borrowers, where dealers still mark up finance, and where ASIC is taking lenders to court for poor conduct — having a finance structure that's genuinely on your side matters more than ever.

Important: This article is general information only and does not constitute financial advice. Your situation is unique — please speak to a financial adviser before making any car finance decision.