The Rate Gap Is Enormous — And It's Real

Let's start with the numbers, because they're confronting. As of mid-2026, the average secured car loan rate for prime borrowers sits at around 7.48% p.a., while the overall average across all borrower types sits closer to 8.92% p.a. For borrowers with impaired credit, specialist lenders are charging anywhere from 13.74% p.a. all the way up to 28% p.a. On a $30,000 loan over five years, the difference between a 6.5% rate and a 9.95% rate is over $3,000 in extra interest. But if your credit score pushes you into specialist territory at 20%-plus, you're not talking about thousands — you're talking about paying nearly half the car's value again in interest alone.

This isn't a hypothetical. It's what's happening to everyday Australians right now.

How the Australian Credit Score System Actually Works

Australia has three credit bureaus — Equifax, Experian, and Illion — and each uses a different scoring scale. That means the same person can have three different scores at the same time. For car loans, most mainstream lenders prefer an Equifax score of 620 or above, with scores of 661 and above typically unlocking the best rates. Below 600, you're mostly looking at specialist lenders with dramatically higher rates. A score of 800 or more is considered excellent and gives you the strongest negotiating position and access to the sharpest rates available.

Here's the kicker: the national average Equifax score is approximately 666 — sitting right at the bottom of the 'Good' band. That means a huge proportion of Australians are financing their cars in the zone where rates start climbing. And most of them have no idea.

What's Driving Rates Higher Right Now

The RBA held the cash rate at 4.35% at its June 2026 meeting, after three rate rises earlier in the year. Car loan rates have followed. The average car loan rate tracked by one major broker network has risen to 7.65% p.a. as of June 2026, up 0.50 percentage points in just six months. Rates started rising in December 2025 and have climbed every month since, coinciding with back-to-back RBA rises in February, March, and May. Economists remain divided on what the RBA will do at its August 2026 meeting — some predict a hold, others forecast another increase. Either way, the era of cheap money is firmly over. If your credit score is anything less than excellent, you're paying a meaningful premium on top of already elevated base rates.

The Dealer Finance Trap (And What ASIC Found)

Here's where it gets worse. ASIC's landmark Report 832 — released in June 2026 after examining data from over 350,000 car loans across eight major lenders — found median interest rates varying wildly, ranging from around 10% to up to 22%. That's not market variation. That's a system where your outcome depends heavily on who's sitting across the table from you at the dealership. ASIC found loan establishment fees as high as $9,000 on a loan of just $49,000. On top of that, nearly half of all consumers who defaulted on their car finance repayments did so within the first six months of the loan — suggesting many were approved for loans they simply couldn't afford from day one. And for those who fell behind and had their car repossessed? Almost 90% of them still owed more than half of their original loan amount after the car was sold. They lost the car and kept the debt.

ASIC Commissioner Alan Kirkland put it plainly: lenders are not doing enough to monitor the experiences of borrowers, especially where loans are sold through third parties like dealers or brokers. The regulator's message was direct — responsibility for consumer outcomes cannot be outsourced. ASIC has since taken action against multiple lenders including Money3 Loans, which was ordered by the Federal Court in April 2026 to pay $1.55 million in penalties for breaching responsible lending obligations.

The Five Things That Actually Determine Your Rate

How to Actually Improve Your Position Before You Apply

The good news is that your credit score is not fixed. It's a snapshot, and it can move — sometimes significantly — in a matter of months. Here's what actually works:

What This Means for Your Car Finance in 2026

Here's the blunt truth: in the current rate environment, the finance structure you choose — and the credit score you walk in with — will likely have a bigger impact on the total cost of your car than almost anything else you negotiate. On a $30,000 loan over five years, the difference between a 7% rate and a 20% rate is around $180 per month — or more than $10,800 over the life of the loan. That's a family holiday every year. That's more than the deposit most people put down.

This is exactly the problem Milam was built to solve. Standard car finance — whether it's a dealer loan, a bank loan, or a GFV product — is structured so the lender wins regardless of what happens to the value of the car. You pay interest, you carry the risk, and when the loan ends, you walk away with nothing. Milam flips that. Lower weekly payments AND an equity payout when you return the car, instead of handing back the keys and getting nothing. That's not how car finance has traditionally worked in Australia — but it's how it should work.

Before you sign anything, understand your credit score, understand the total cost of the loan (not just the weekly payment), and understand who's actually in your corner. If you're not sure, speak to a financial adviser before committing to any car finance product.

Three Things to Do Before You Sign Anything

Know before you sign

ASIC found loan establishment fees as high as $9,000 on a $49,000 loan — and nearly half of all defaulters stopped repaying within the first six months. The system isn't designed with your outcome in mind. You need to be.