They Took the Car. The Debt Stayed. ASIC Just Proved This Is Happening to Thousands of Australians.

In June 2026, ASIC released Report 832 — Lifting the Bonnet: ASIC's Review of Car Loans. It examined data from over 350,000 loans across eight of Australia's largest car finance providers. The findings were confronting. Among a sample of 250 repossessed car loans, 90% of borrowers still owed more than half their original loan amount after their car was taken and sold. In some cases, they owed more than 100% of the original loan — meaning the repossession made things worse, not better.

How Does This Even Happen?

It sounds impossible. You lose the car. Surely the debt goes with it? Unfortunately, no. And understanding why requires a quick look at how most Australian car loans actually work.

When you finance a car, the loan is secured against the vehicle. If you miss repayments, the lender can repossess and sell the car to recover what you owe. But here's the problem: cars depreciate fast. A new car can lose 10% to 15% of its value the moment you drive it off the lot. Over a standard five-year loan, your car's market value and your remaining loan balance are almost never in sync — especially in the early years when you've barely touched the principal.

ASIC's report found that loan-to-value ratios (LVRs) on some car loans ranged from 97% all the way up to 127%. That means some borrowers owed more than the car was worth from day one. Add depreciation, add fees, and by the time a car gets repossessed and sold at auction — often for well below market value — the proceeds barely scratch the surface of the debt.

The cost of repossessing and selling your car is also added on top of what you already owe. So the bill gets bigger, not smaller, the moment the repo agent shows up.

The Numbers Are Worse Than You Think

Let's put some real Australian figures around this. The average car loan in Australia in 2026 is $34,282. For new cars, the average loan climbs to $46,055. At an average interest rate of around 8.92% per annum across the market, a borrower on a five-year loan is paying a significant chunk of interest before they've meaningfully reduced the principal.

ASIC also found that almost half of all borrowers who defaulted did so within the first six months of their loan. Think about that. In six months, on a five-year loan, you've paid almost nothing off the principal. If your car gets repossessed at that point, the auction sale price will almost certainly leave a large residual debt — all yours to keep, carless.

ASIC Commissioner Alan Kirkland put it plainly: "Consumers shouldn't lose their car and still be stuck with the bulk of their debt." And yet that's exactly what the data shows is happening.

The Fee Problem Makes It Even Worse

Here's another layer that compounds the problem. ASIC found that most car loans came with not one but two establishment fees — a lender fee ranging from $299 to $995, and a separate distributor fee ranging from $912 up to $2,500. In the worst cases reviewed, combined fees reached $9,000 on a loan of approximately $49,162. That's 18% of the loan amount gone before you've made a single repayment.

When your loan starts $9,000 in the hole from fees alone — before interest, before depreciation — the maths of repossession become brutal. It's not a design flaw. For some players in this industry, it's a design feature.

The Dealer Finance Connection

Where are all these expensive, high-LVR loans coming from? ASIC identified a clear pattern: many of the worst outcomes were linked to loans sold through third-party distributors — specifically car dealerships and brokers — rather than directly by lenders. ASIC found shortcomings in some lenders' oversight of these distribution channels, and found that some dealership staff were trained to override consumer objections to certain types of finance.

This is the classic dealer finance playbook: the focus is on getting you to sign, not on whether the loan is actually right for you. Responsible lending checks were, in some cases, inadequate. Affordability assessments were, in some cases, wrong. And when things went south, hardship support was inconsistent — with some lenders' collections teams even contacting customers for payment despite active hardship arrangements being in place.

Car Repossessions Are Rising in Australia Right Now

This isn't a fringe issue. Australia is seeing a sharp increase in vehicle repossessions driven by cost-of-living pressures, and automotive arrears data from the banking sector shows that Australians falling more than 90 days behind on car repayments is now at about twice the rate of just two years ago. Younger Australians are disproportionately affected.

Rising repossessions mean more cars hitting auction at below-market prices — which means more residual debt left over for borrowers who've already lost their vehicle and their ability to get to work.

What Are Your Rights If You Miss Repayments?

Before a lender can repossess your car, they are required under the National Credit Code to send you a default notice giving you at least 30 days to remedy the missed payments. Do not ignore this notice. Contact your lender immediately and ask about hardship variations. If your lender refuses to engage, you can lodge a free complaint with the Australian Financial Complaints Authority (AFCA) — and while your dispute is active, repossession action must pause.

Your car cannot be repossessed from private residential property — including your driveway or garage — without your written consent or a court order. If a repo agent turns up at your home, know your rights.

What Milam Does Differently

The core problem exposed by ASIC is this: in a standard car loan, the depreciation risk sits entirely with you. The car loses value. Your debt doesn't shrink fast enough to keep up. And when things go wrong, you're left holding the gap.

Milam is built on a fundamentally different idea. With a Milam GFV loan, the guaranteed future value of the car is locked in at the start — which means the lender, not you, carries the residual value risk. Your weekly payments are lower because you're not financing the full depreciation of the car. And when you return the car at the end of the term, if it's worth more than the GFV, you get an equity payout — money back in your pocket, not a residual debt hanging over your head.

It's the opposite of the repossession trap. Instead of losing your car and keeping the debt, you return the car and potentially keep a cheque.

Five Things to Do Right Now If You Have a Car Loan

• Check your loan-to-value ratio. Do you know what your car is worth today versus what you still owe? If your car is worth less than your loan balance, you're in negative equity — and you need a plan.
• Know your hardship rights. Every lender is legally required to have a hardship policy. Find out what yours says before you need it.
• Read the fees section of your contract. Add up every establishment fee, monthly fee, and late payment fee. Compare that to your loan amount. If the fees are more than 2–3% of your loan, ask hard questions.
• Don't just focus on the weekly payment. A low weekly repayment can mask a long loan term or a large balloon payment. Look at the total amount repayable over the full term.
• If you're shopping for finance, compare before you sign. Less than a third of Australians feel confident comparing car loans without help — but walking into a dealership and accepting their finance offer is statistically one of the most expensive things you can do.

And as always — if you're dealing with existing debt stress or trying to work out which finance structure is right for your situation, speak to a financial adviser or a free financial counsellor. The National Debt Helpline (1800 007 007) is free and confidential.