When Car Finance Goes Wrong: The ASIC Data Every Aussie Borrower Needs to See

Why ASIC Is Looking at Car Finance Right Now

ASIC — Australia's corporate and financial services regulator — is currently conducting a formal review of the country's car finance sector. The trigger? A flood of consumer complaints about dodgy sales tactics, excessive fees, sky-high interest charges, and concerns that some lenders aren't properly checking whether borrowers can actually afford the loans they're being sold. The review is expected to wrap up before the end of 2026, and the findings are already painting a troubling picture.

This isn't some abstract regulatory exercise. It's a direct response to real Australians being put into loans they couldn't sustain — and then losing their cars anyway, while still owing a mountain of debt.

The Two Numbers That Should Alarm Every Borrower

Here are the stats that stopped us in our tracks. ASIC found that nearly half of consumers who defaulted on their car finance repayments did so within the first six months of taking out the loan. Not year three or four — the first six months. That means many people were in trouble almost immediately after driving off the lot.

But here's where it gets worse. Among borrowers whose cars were repossessed and sold, almost 90% still owed more than half of their original loan balance. Let that sink in. The car is gone. The lender has sold it. And the borrower still owes tens of thousands of dollars. That's not just financial stress — that's a debt trap with no car at the end of it.

These aren't fringe cases. They are a systemic pattern inside Australia's car finance market, and they're happening right now, in 2026, while Australians are collectively borrowing around $4.9 billion every single quarter to buy vehicles.

Who Is Getting Hurt — And Why

The average Australian car loan sits at $34,282, with new car loans averaging $46,055. The average interest rate across all borrowers is 8.92% p.a. — well above the lowest advertised rates you see plastered on dealership windows. That gap between what's advertised and what most people actually pay is one of the core problems ASIC is investigating.

Here's the dealer trick at the heart of it: 47% 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. Nearly one in three didn't compare any other lenders before signing. The salesperson's job is to sell cars and maximise finance commissions — not to find you the best possible loan. Those two goals are not the same thing.

Younger borrowers are especially exposed. Surveys show Gen Z carries the highest car loan stress of any generation, with 21% saying their car or personal loan is the most stressful debt they carry. Many are entering the market for the first time, prioritising fast approval or lower upfront repayments — often without realising that longer loan terms mean paying significantly more interest over the life of the loan.

The Rate Gap Is Costing Australians Thousands

The spread between the best and worst car loan rates in Australia right now is nearly 8 percentage points. On a $35,000 loan over five years, that's the difference between paying around $6,100 in interest versus $13,790. Same car. Same loan amount. Same person. Just a different lender — and whether you shopped around or took whatever the dealer offered on the day.

The market-wide average rate of 8.92% p.a. is the rate most Australians end up with. Prime borrowers who use a broker or shop independently are accessing rates closer to 7.48% p.a. — sometimes lower. The difference on a $46,000 new car loan over five years is roughly $3,000 to $4,000 in extra interest charges. That's a holiday. That's a year of groceries. That's money you're handing to a lender because the dealership made it easy and you didn't have time to look elsewhere.

What 'Responsible Lending' Is Supposed to Mean

Under Australian consumer credit law, lenders are required to make a reasonable assessment of whether a loan is unsuitable for you before approving it. That means looking at your income, your expenses, and your capacity to repay without substantial hardship. ASIC's review suggests that for a significant chunk of the market, this isn't happening properly — or the assessments are being gamed by people who are incentivised to get the deal across the line.

The fact that nearly half of all defaulters are failing within the first six months is a red flag for the industry. If someone defaults that quickly, the responsible lending assessment almost certainly didn't reflect their real financial position. Either the borrower wasn't honest about their expenses, or the lender didn't look hard enough. ASIC is trying to work out which.

The Smarter Way to Approach Car Finance

None of this means you shouldn't finance a car. It means you should go in with your eyes open. Here's what actually protects you:

• Get pre-approved before you go to the dealership. When you walk in with your own finance sorted, the dealer's finance manager loses most of their leverage. You're buying a car, not financing one — and those are very different conversations.
• Compare the comparison rate, not the headline rate. Under Australian consumer credit law, lenders must display both. The comparison rate includes fees and charges — it's the real cost. A loan advertised at 5.99% p.a. with a $600 establishment fee and monthly account-keeping fees might carry a comparison rate of 7.2% p.a. or higher. That's the number that matters.
• Understand exactly what you'll owe if things go wrong. Ask the lender: if I needed to exit this loan in year two, what would I owe? Most people never ask this. The ASIC data shows they probably should.
• Know what product you're actually signing up for. A standard loan, a balloon payment loan, and a Guaranteed Future Value (GFV) loan all look similar on a payment schedule — but they behave very differently at the end of the term. Make sure you know which one you have.
• Don't let urgency drive the decision. Dealers are very good at creating pressure — end-of-month targets, limited stock, today-only rates. That pressure is designed to stop you from comparing. Take the time anyway.

What Milam Does Differently

At Milam, we built our product specifically to address the two things that cause the most harm in Australian car finance: payments that stretch borrowers too thin, and walking away at the end with nothing to show for it.

With a standard car loan, you pay for five years and own a depreciated asset. With a standard GFV loan, you get lower payments — but hand the car back and get nothing. Milam gives you lower weekly payments and an equity payout when you return the car. You're not just servicing someone else's asset. You're building something — even on a financed car.

We're not going to tell you Milam is right for everyone, because it isn't. But if you're financing a car in 2026 and you're not asking hard questions about what you get back at the end of your loan term, the ASIC data suggests you should be.

This article is general information only and does not constitute financial advice. Please speak to a financial adviser to understand which car finance product suits your personal circumstances.