Australia’s car loan trap: industry warned to be ‘fair’
Car buyers risk financial loss when they sign up for loans offered by brokers and dealers, the market regulator says.
Australian Securities and Investments Commission publishes 37-page report report He turned to the motor vehicle finance industry after noticing an increase in complaints.
He found shortcomings in oversight of distributors such as brokers and car dealers who sell loans and warned the industry to do better.
“This review highlights the potential risks that could arise if lenders fail to effectively screen third-party distributors and how consumers could pay the price,” Commissioner Alan Kirkland said in a statement Wednesday.
“Responsibility for consumer outcomes cannot be outsourced.”
The report cites examples of harm, including wide variations in car loan costs and lenders taking back cars after hardship relief requests are denied, and consumers facing large post-sale debts.
In one case, Sebastian took out a $15,678 car loan to buy a 2105 Holden Cruze, but eight months later the lender repossessed the car and sold it.
Sebastian’s loan balance before the car was sold was $18,237, but he later owed $20,714; that was a whopping 114 percent of his credit at the time of repossession.
The report stated that the cost of auto loans to buyers could be between 10 and 22 percent.
Loans are generally subject to two origination fees: a lender origination fee, which ranges from $299 to $995, and a distributor origination fee, which ranges from $912 to $2,500.
But a lender that charged the highest total fee of all loans also charged a third fee, resulting in one customer paying over $9,000 in fees for a $49,162 car loan, according to the report.
This included more than $7,800 given to the lender and $1,320 given to the broker, about 18 percent of the total loan amount.
ASIC also found that some received inconsistent support when consumers were in a difficult situation, while many whose vehicles were seized and sold were left with significant debts, just as in the case of Sebastian.
“Consumers shouldn’t lose their cars and still be left with the bulk of what they owe,” Mr. Kirkland said.
But a sample of 250 loans reviewed by the report’s authors shows that 90 percent of consumers still owe more than half of the total loan amount, and in some cases, 100 percent of the loan.
ASIC examined data from more than 350,000 loans across eight car finance providers, including some of Australia’s largest, established in March 2023 and 2025.
The Australian Financial Industry Association is reviewing the findings.
“Customers must be treated fairly and with respect, and lenders must meet their legal obligations,” said company president Diane Tate.
“The industry needs to continue to raise standards in line with evolving customer needs and changing conditions in the transport market and wider economy.”
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