The Used Car Market Has Shifted — Here's How to Finance Smarter in 2026

What's Actually Happening in the Used Car Market Right Now

The post-COVID used car frenzy is over. Supply chains have normalised, ex-lease vehicles are flooding back onto the market, and buyers have options again. According to the Australian Automotive Dealer Association, national used car sales totalled 2.32 million vehicles in 2025 — a broadly stable result year-on-year, but the real story is in the conditions. As one industry report put it, this is a market settling into a "healthier rhythm" after years of inflated prices and limited stock.

Retained values are softening too. Average days-to-sell have ticked up slightly, which means sellers — including dealers — are under more pressure to move metal. For you as a buyer, that's a good thing. But a softer market for cars doesn't automatically mean a better deal on finance. Those are two completely separate conversations, and dealers know it.

The Interest Rate Reality in 2026

Here's the number that should be living rent-free in your head before you sign anything: the average car loan interest rate in Australia is sitting at 8.92% p.a. The Reserve Bank of Australia puts the average fixed-term personal loan rate (which includes car loans) at 9.06% p.a. — well above the teaser rates splashed across dealer websites and manufacturer campaigns.

Some manufacturers are currently running eye-catching EOFY promotions to move stock — including headline comparison rates well under 1% on select models. Those deals are real, but they are model-specific, stock-specific, and come with conditions buried in the fine print. If you're not buying that exact car in that exact spec, that rate doesn't apply to you. And nearly 1 in 3 Australians say they didn't choose the right car loan — with 47% of those people blaming the dealership salesperson for steering their finance decision.

The Comparison Rate Trick — Still Happening in 2026

A low advertised rate and a low comparison rate are very different things. The comparison rate folds in most fees and charges to give you the true cost of the loan. A loan advertised at 5.99% p.a. can have a comparison rate of 8% or higher once establishment fees, monthly account-keeping fees, and early repayment penalties are included. Always ask for the comparison rate — in writing — before you discuss repayments. If a dealer or lender is cagey about giving it to you, that's your answer.

Dealer Finance vs. Going Direct: The Numbers Are Real

Here's a scenario worth running. The average new car loan in Australia is $46,055. Over five years at 9.06% p.a. (the RBA average), that's roughly $9,600 in interest. At a genuinely competitive rate of 6.5% p.a. through a bank or non-bank lender you sourced yourself, that same loan costs around $7,700 in interest — a saving of nearly $1,900. That's before you account for any fees baked into dealer finance products.

Dealer-integrated finance currently captures 56.71% of all car finance transactions in Australia. That's a majority of buyers taking whatever rate the F&I (finance and insurance) manager serves up in the dealership office. The dealership makes a commission on that loan. You are not their priority — their margin is.

What the ATO Car Limit Means for Business Buyers

If you're buying a vehicle for business use — whether you're a sole trader, small business owner, or self-employed — the ATO has a cap on what you can claim. For the 2025–26 financial year, the car depreciation limit is $69,674. That's the maximum value of a passenger vehicle you can use when calculating depreciation deductions, regardless of what you actually paid for the car. Buy a $90,000 SUV and you can only depreciate $69,674 of it.

There's also a GST credit cap to know about: even if your vehicle costs more than the limit, the maximum GST credit you can claim for 2025–26 is $6,334 (that's one-eleventh of $69,674). These are hard ATO limits, not dealer estimates. And importantly, the car limit applies to passenger vehicles — utes and commercial vehicles with a payload over one tonne are treated differently. Speak to a financial adviser or registered tax agent to understand how these limits apply to your specific situation.

The GFV Problem Nobody Talks About

Guaranteed Future Value loans — sometimes called balloon loans or GFV products — are one of the fastest-growing structures in Australian car finance. The pitch is simple: lower monthly repayments because a chunk of the car's value is deferred to the end of the loan. What dealers don't lead with is what happens at the end.

At loan maturity, you typically face three options: pay the balloon (often $10,000–$20,000+), refinance it (at whatever rate the market is offering then, not now), or hand the car back and walk away with nothing. That last option — the walk-away — sounds clean. But you've made payments for three to five years and you leave the dealership with zero equity, zero payout, and no asset. You essentially rented the car at purchase-loan prices.

This is exactly the structure Milam was built to challenge. Milam gives customers lower weekly payments like a GFV loan — but when you return the car, you get an equity payout back, not a handshake and a wave goodbye. The difference can be thousands of dollars in your pocket instead of the lender's.

The Used EV Wildcard: Opportunity or Trap?

Used EV sales in Australia more than doubled in March 2026 — from 3,176 units in February to 7,557 in March — as fuel prices spiked to around $2.50 per litre for unleaded. Demand moved so fast that available stock dropped 38% in a single month, compressing days-to-supply to under 29 days. That's a seller's market, fast.

The lesson here for buyers is about timing. When fuel prices spike, panic-buying floods the used EV segment and prices jump with it. If you're considering a used EV, doing your research before a fuel-price event — not during one — typically gives you more stock to choose from and more negotiating room on price. And if you're financing a used EV, make sure your loan structure accounts for battery degradation and the potential impact on residual value. Some lenders are still using residual value tables built for petrol cars.

Five Things Every Australian Buyer Should Do Before Signing

• Get your own finance pre-approval first. Walk into the dealership knowing your rate. It changes the entire conversation.
• Ask for the comparison rate in writing. Not the headline rate — the comparison rate. This is the number that actually tells you what the loan costs.
• Compare at least three lenders. Bank, non-bank, and fintech. The difference on a $46,000 loan can be thousands of dollars.
• Understand what happens at the end of your loan. GFV/balloon? You need to know exactly what your options are at maturity and what the balloon amount is — before you sign, not after.
• If you're self-employed, know your ATO limits. The $69,674 depreciation cap and $6,334 GST credit cap are hard limits. Know them before you choose a vehicle price point.

The used car market in 2026 genuinely offers better conditions for buyers than anything we've seen since 2020. More stock. More price pressure on sellers. More choice. But none of that matters if you sign a finance deal you don't fully understand. The car market has shifted in your favour — make sure your finance deal does too.

This article is general information only and does not constitute financial advice. Please speak to a financial adviser or registered tax agent before making any car finance or tax decisions.