What car dealerships don't tell you about the finance they're offering

OPINION

I'm going to say something the car industry doesn't love hearing – the finance desk at a dealership is not there to help you. It's there to help them.

I don't say that to be dramatic. I say it because Australia's financial watchdog just said it too, and backed it up with data from over 350,000 loans.

In June 2026, ASIC released Report 832, titled "Lifting the Bonnet: ASIC's Review of Car Loans." 

It examined car finance across eight of Australia's largest providers and found serious shortcomings in how loans are being sold to everyday Australians. 

One of the report’s findings: Loan establishment fees as high as $9,000 on a $49,000 loan. 

Consumers are losing their cars to repossession and still owing more than the original loan amount. Nearly half of all defaults happened within the first six months, raising real questions about whether people were sold loans they could never actually afford.

This isn't a fringe issue. This is the mainstream car finance market.

See also: What's the most you can borrow with a car loan

The numbers that should make you stop and think

The ASIC report isn't the only data worth paying attention to right now.

A recent Carsales survey found that more than one in four Australians regret how they financed their car. Of those, 47% said they trusted the dealership salesperson to select the finance product on their behalf. 

Nearly one in five said they felt rushed through the process. And 23% said the loan fees and terms weren't clearly explained to them at all.

Gen Z borrowers had the highest regret rate of any age group, 54%, and were also the most likely to rely on dealership staff to choose their loan. 

About 61% of Gen Z borrowers who regretted their decision said they had trusted the salesperson to choose the product for them.

This isn't a coincidence. It's a pattern.

Why dealer finance almost always costs you more

Here's something most people don't know when they're sitting in that showroom, keys in sight, paperwork in front of them.

The person handling your finance at a dealership is not a finance professional. They are salespeople. Their department happens to be finance, and their job is to get you into that car today.

When a dealer runs your application, they're essentially sending it out blind, then finding out if you fit based on what the first lender says. If that lender says no, those credit hits can stack up quickly. 

Multiple enquiries in a short window damage your credit score before you've even driven off the lot.

Think about it this way. If you were buying a house, you wouldn't let your real estate agent decide on your home loan. You'd go to a mortgage specialist, not the sales agent. 

It's the same with cars. 

Don't let the salesperson run your file blind and try to work out where you fit. If they get it wrong, it could cost you.

A broker knows exactly which lender suits your situation and approaches them once, correctly, before anything hits your file.

Dealer finance isn't always the wrong choice. For the right client, in-house finance from manufacturers like Toyota, BMW or Volkswagen can be genuinely competitive. 

The problem is the misconception that walking into a dealership means you're getting the best deal in the market, when what you're actually getting is the best deal through that dealership. 

Those are two very different things.

See also: Car loans vs Dealer finance

Buyers tripping up over balloon payments

The balloon payment is where I see clients get into the most trouble.

It looks attractive because it lowers your monthly repayments. What it also does is leave you owing a lump sum at the end, sometimes 30 to 40% of the car's original value. 

For clients turning over vehicles every two to three years, a balloon can make sense. 

For everyone else, three questions worth asking before you agree to one:

• Can you save that lump sum by the time the loan ends? 
• Can you guarantee you'll be in the same financial position to refinance out of it in five years? 
• And if you do refinance, are you comfortable paying for the same car over a decade, with interest and fees continuing to accumulate along the way?

We see clients stuck in this cycle regularly. They have too much negative equity, with a car worth less than what they still owe, because the focus was on keeping repayments low rather than understanding the full cost.

Calculate an estimate of your balloon payment using Savings.com.au's Car Loan Calculator

What the law actually says, and why it matters

Here's the distinction that most Australians don't know exists.

Licensed credit providers and credit assistance providers must comply with responsible lending and other obligations under the National Consumer Credit Protection Act. 

They must recommend what suits your situation, not what earns them the most commission. That is a legal obligation.

Dealership finance staff do not operate under the same requirements.

Their job is to facilitate the sale of the car and close the deal on the day. That is not the same thing as finding you the best loan. It has never been the same thing. 

And the ASIC report released this month makes clear that the gap between those two things has been costing Australian consumers real money.

What I see every day

I work with clients across the full credit spectrum, from people with excellent credit who just want the best deal to people who've been through financial hardship and are rebuilding. 

Across all of them, one of the most common things I hear is some version of this:

"I just took what the dealer offered. I didn't know I could do it differently."

Some of them are paying thousands more than they should be. Some are locked into loan terms that don't fit their lives. Some took on balloon payments they didn't fully understand and are now facing a lump sum they weren't prepared for.

None of them was bad with money. They were just in a room with someone whose interest wasn't the same as theirs.

What to do instead

This is the practical part.

Get pre-approved before you walk into a showroom. When you arrive with finance already in place, you're negotiating the car as a cash buyer. This changes everything about that conversation, including, often, the price of the car itself.

Compare beyond one lender. A broker may have access to a panel of 30 to 90-plus lenders and could match your application to the ones most likely to approve it at the best rate. 

You make one enquiry. Your credit score takes one hit, not multiple. And you see the actual market, not just what one dealership happens to offer.

Read the comparison rate, not just the headline rate. The rate in the big print rarely tells the whole story. The comparison rate factors in fees and gives you a truer picture of what the loan actually costs.

Ask directly about fees. Establishment fees. Monthly fees. Early exit fees. Balloon payment amounts. You're entitled to a full breakdown before you sign anything. If it's not being offered, ask for it.

See also: The most common car loan fees and charges

One last thing

ASIC's review of the car finance industry is ongoing and expected to conclude before the end of 2026. Regulatory change may be coming. But that doesn't help the people who are already locked into loans that cost them more than they should.

You don't have to wait for regulation to protect you. You just need to ask the right questions before you sign.

And ideally, ask them of someone whose legal obligation is to be on your side.