Interest Rate Disparity
  • Car loan interest rates across the market seem to be moving up at a slower rate than mortgages.
  • Experts have attributed this to car loan rates generally being more tailored to the individual borrower rather than market forces and RBA movements.
  • Car loans are most often offered on fixed interest rate terms, meaning there is more of a lag effect in rate rises than on mortgages, which are predominantly variable.

RBA data indicates the average rate of new variable-rate lending to owner occupiers has increased 300 basis points since the end of April 2022.

This is compared to 270 basis points' worth on secured personal loans on a fixed rate - RBA data does not specify car loans specifically. 

A spokesperson for NAB said the bank's rates for personal loans secured by a vehicle have not increased in line with recent home loan rates.

This is because car loans are often more tailored to the individual, and it looks to be the case when comparing a range of car loan options from the major banks.

Here’s a quick look at what’s on offer from the big four banks:


Home Loan Rate

Personal Loan


Standard Variable Rate:


6.99% p.a. (6.99% p.a. comparison rate) for LVR 80% or less

Variable Rate:


Interest rates range from 6.99% p.a. to 18.49% p.a. (Comparison rates range 7.69% p.a. to 19.09% p.a.)


Standard Variable Rate:


6.24% p.a. (6.69% p.a. comparison rate) for LVR 70% to 80%

Variable Rate:


Interest rates range from 8.00% p.a. to 20.00% p.a. Comparison rates range 8.91% p.a. to 20.84% p.a.)


Base Variable Rate:


6.24% p.a. (6.28% p.a. comparison rate) for LVR 80% or less, available to new applications


Variable Rate:


Interest rates range from 6.99% p.a. to 19.99% p.a. Comparison rates range 7.91% p.a. to 20.83% p.a.)


Basic Variable Rate (Flexi First Option):


6.09% p.a. (6.42% p.a. comparison rate) for LVR 70% to 80%)

Westpac’s Car Loan only comes in fixed rates:


For petrol/diesel/LPG, interest rates range from 5.99% p.a. to 11.99% p.a. Comparison rates range 7.20% p.a. to 13.15% p.a.)


For electric/hybrid. Interest rates range from 5.49% p.a. to 11.49% p.a. (6.70% p.a. to 12.65% p.a. comparison rate).


Are car loans being impacted by rate hikes?

Ausloans Sydney Metro finance specialist Laurene Moubarak said car loans have been impacted by several factors, including issues in new vehicle supply, increasing costs of living, and changes to interest rates.

“Over the past two years new vehicles have been in short supply resulting in little to no discounting, long lead times for delivery, and price increases whilst people are waiting for their car to arrive, this has also driven the price of used cars up due to shortage in supply — each of these factors have resulted in consumers borrowing capacity diminishing,” Ms Moubarak told Infochoice.

Ms Moubarak said it is crucial to note, however, that due to the relatively smaller amount usually borrowed for a car compared to loans for properties, rate rises have not had the same effect.

“Of the factors affecting financing for cars, rate increases had the least impact on car loans," she said.

“However, it's not necessarily that car loans have become more affordable; the dramatic and sudden increase in interest rates has seen mortgage repayments increase by such a large amount that it has left the average household struggling.”

For instance, a 3 percentage point increase in interest on a $40,000 car loan is substantially less than the same increase on a mortgage of $700,000.

“It may give the illusion that a car loan is more affordable but it's relative to the amount borrowed,” Ms Moubarak said.

“With a lot more people holding out on buying a new home we are seeing that their surplus funds are going into the next affordable big-ticket item, being a car.”

MFG managing director and principal broker Theo Laspatzis shared the same sentiments, adding that while the whole finance industry is on the same boat and has become affected by the rate hikes, there are key differences to consider.

“Car loans are 90% of the time much less in amount borrowed than a mortgage — they come with a lower payment and therefore do not affect a consumer’s cash flow as much as a mortgage would when rates continue to rise,” Mr Laspatzis told Infochoice.

“The difference between car loans and home loans include the loan amount, loan duration, collateral, market dynamics, and government involvement — it's important to note that these differences are generalisations and individual circumstances can vary significantly based on factors like credit history, income, and prevailing market conditions.”

Changes in car financing and buying trends

Ms Moubarak said despite the uncertainty of the situation amid the current rate hikes does not really have a drastic impact on the demand for car financing.

“With the average car loan not being so greatly affected by the rate increase, the demand remains fairly consistent,” she said.

“People seem to be holding on to their cash and preferring to finance their cars, this gives the consumer confidence knowing that they have a safety net in their savings.”

While the costs of vehicle financing are still influenced by the movement of the cash rate, the common practice of discounting seen pre-COVID appears to be returning, resulting in lower amounts borrowed.

Meanwhile, in terms of buying trends, going for a new car seems to be a more realistic proposition for many consumers nowadays, especially with the emergence of new vehicle manufacturers importing vehicles to Australia over the past five to 10 years,

“We now have more affordable alternatives in each vehicle market segment therefore consumers are borrowing less money to get into their new car,” Ms Moubarak said.

“With predominantly fixed interest rates on vehicle loans, consumers have confidence in what commitment they are making, knowing that the last repayment on their loan will be the same as the first. For new borrowers, any movement in rates are somewhat negligible when compared to home loans.”