Your Weekly Car Payment Looks Affordable. Here's What It's Hiding.

ASIC Just Reviewed 350,000 Car Loans. The Results Were Not Pretty.

On 24 June 2026, ASIC released Report 832 — Lifting the Bonnet: ASIC's Review of Car Loans. The findings put the entire car finance industry on notice. The regulator identified serious shortcomings in how lenders oversee the dealers and brokers who sell their loans, exposing everyday Australians to financial harm.

ASIC Commissioner Alan Kirkland said lenders "should be monitoring the experiences of borrowers, especially where loans are sold by third parties like dealers or brokers" — and that responsibility for consumer outcomes cannot be outsourced. In plain English: the dealership finance manager sitting across from you is not your financial adviser. They're a distribution channel for a lender's product, and their incentives don't always align with yours.

So what's actually hiding inside that low weekly number they quoted you?

The Balloon Payment: The Trick That Makes Every Loan Look Cheap

Here's the move. You're buying a $40,000 car. The finance manager structures a loan with a 30–40% balloon payment at the end. Your weekly repayments drop significantly — and suddenly the car feels affordable. What they don't say out loud is that you've been charged interest on the balloon amount for the entire loan term, even though you never paid a cent of it down.

Think about what that means on real Australian numbers. On the average car loan of $34,282, a balloon payment typically sits between $6,856 and $13,713. You'll owe that lump sum at the end — in cash, through a refinance, or by selling the car. And here's the catch: a new car can depreciate 20–30% in the first two years alone. If your balloon is set higher than what your car is actually worth at the end of the term, you can't sell it to cover the debt. That's negative equity — and it's one of the most common problems in Australian car finance right now.

Canstar research on a $40,000 loan found that adding a balloon of $12,000 reduced monthly repayments by $158 — but increased the total cost of the loan by approximately $2,537. That's the price of the cheap repayment illusion.

The Interest You Pay on Money You Still Owe

This is the part that genuinely shocks most people when they see it written down. A balloon payment doesn't sit there interest-free while you make your regular repayments. You pay interest on the full balloon amount for every single month of the loan. It's parked at the end of the contract, untouched — and you're being charged for it the whole time.

On a 5-year loan with a 40% balloon on a $40,000 car, you're paying interest on $16,000 for 60 months without reducing it by a dollar. Meanwhile, the market rate on a standard secured car loan is sitting around 7–9% in mid-2026, with the Reserve Bank cash rate holding at 4.35%. The interest clock doesn't stop just because you chose the smaller weekly repayment.

Balloon vs. Residual: What's the Difference and Why Does It Matter?

These two terms get used interchangeably at the dealership, but they're not the same thing — and knowing the difference could save you thousands.

• Balloon payment: A fixed lump sum agreed at the start of a standard car loan. It's a percentage of the loan amount — not the car's actual future value. Depreciation is not factored in. The lender doesn't care what the car is worth when the balloon falls due. You do.
• Residual value: Used in leases and novated leases. It's based on an estimate of what the car will be worth at the end of the term, and is governed by ATO minimum thresholds — ranging from 65.63% of the original value for a one-year lease down to 28.13% for a five-year lease. It's designed to reflect reality, not just lower your repayments.

When a dealer uses the word "residual" on what is actually a standard car loan, they're borrowing lease language to make a balloon payment sound more legitimate. Ask directly: "Is this a balloon payment on a loan, or a residual on a lease?" The answer changes everything about your end-of-term options.

The Three Things You're Never Told at the Dealership

ASIC's June 2026 report found big variations in car loan costs across lenders — and that dealer-integrated financing accounts for the majority of loan originations. That concentration of sales through one channel means a lot of Australians are getting one quote, one product, and one set of terms. Here's what the finance manager typically won't volunteer:

• The comparison rate: The advertised rate sounds great. The comparison rate includes fees and gives you the true annual cost. Always ask for it. Some dealer loans carry comparison rates well above the headline figure.
• The total amount repayable: Ask for this number in writing before you sign. Add up every repayment, the balloon amount, all fees and charges. That's the real cost of the car — not the sticker price, not the weekly repayment.
• Your right to shop around: A survey by Money.com.au found that nearly half of Australians who later regretted their car loan said their main mistake was relying on the salesperson at the dealership to guide them on finance. More than a third didn't compare other lenders before deciding. You are not obligated to use dealer finance. Ever.

What Happens When the Balloon Lands and You're Not Ready

Five years feels like a long time when you're signing paperwork in the dealership showroom. But balloon due dates arrive fast — and if you haven't planned for them, your options shrink quickly. Most Australians end up in one of three situations:

• Pay it in cash: Great if you planned ahead and saved for it. Most people don't.
• Refinance the balloon: You take out a new loan to cover the lump sum. That means more interest, more fees, and a longer time in debt — on a car that's now worth significantly less than when you bought it.
• Sell the car: Fine if the car is worth more than the balloon. Not fine if depreciation has pushed the value below it. At that point you're covering the gap out of pocket before you can even hand over the keys.

If you can't pay the balloon and can't refinance, contact your lender immediately. Under Australian consumer credit law, lenders are required to work with you if you're experiencing genuine financial hardship. Don't wait until the due date arrives.

So What Should You Actually Look For?

Here's the short version of what to check before you sign any car finance contract in Australia right now:

• Total amount repayable — every dollar you'll pay over the full term, including the balloon and all fees
• Comparison rate — not the headline rate; the one that includes fees
• Balloon or no balloon — and if there is one, what's your concrete exit plan when it falls due?
• Depreciation reality check — look up the car's expected resale value at the end of your loan term before you set the balloon percentage
• Pre-approval from a bank or lender before you walk into the dealership — it gives you a real benchmark to compare against whatever the finance manager quotes you

The dealer's job is to move cars. The finance manager's job is to move finance products. Neither of those jobs requires them to find you the cheapest loan. That job is yours — or your financial adviser's.

Where Milam Fits In

Standard car finance is built around one question: how low can we make the repayment look? The balloon payment is the industry's answer — and as ASIC's June 2026 report makes clear, it's costing Australians real money.

Milam is built around a different question: what if you could have lower weekly payments and actually get something back at the end? With Milam's GFV-based structure, you get a guaranteed future value locked in at the start, lower weekly payments than a standard loan — and when you return the car, any equity above the GFV comes back to you. Not to the dealer. Not to the lender. To you. That's the opposite of a balloon payment. Instead of a lump sum debt waiting at the end, you have a potential equity payout.

No other standard car loan in Australia does that.

This article contains general information only and is not financial advice. Everyone's situation is different — speak to a financial adviser before making any decisions about car finance.