The rules in brief
The comparison rate is worked out for a set loan amount and term, which the advertisement must state, and it must be shown at least as prominently as the interest rate, with a prescribed warning that it is true only for the examples given. Fees that depend on events that may or may not happen can be left out, and the longer form of the warning names redraw and early repayment fees among them; the full rules are in Part 10 of the National Credit Code and the regulations.
Two details matter more on a car loan than elsewhere. At $10,000 and $30,000, the advertisement must say whether the rate is for a secured or an unsecured loan, a difference the security guide explains. The other is the size of the fees that go into the rate.
The fees on a car loan
ASIC’s 2026 review found that car loans typically carried both a lender establishment fee and a distributor establishment fee, the second charged to the borrower under the loan contract and passed on to the dealer or broker. ASIC adds that when loan amounts are low, these fees often make up a substantial proportion of the loan.
An illustration: the same fees on two loans
The figures below were worked for this guide and are an illustration with round numbers, not a market rate or a comparison rate any lender has published. Each loan has an interest rate of 8% a year and $1,500 of upfront fees added to the amount owed. ASIC’s review found lender fees of $299 to $995 and distributor fees of $912 to $2,500. The $1,500 is a round number for two fees, not a typical charge. Repayments are equal and monthly, with totals worked from unrounded repayments; the rate shown is the yearly rate at which the repayments pay back the money actually advanced for the car, which is the shape of the calculation in the regulation.
| Loan for the car | Term | Monthly repayment | Total repaid | Rate with fees inside |
|---|---|---|---|---|
| $30,000 (no fees) | 5 years | $608.29 | $36,498 | 8.00% |
| $30,000 with $1,500 of fees | 5 years | $638.71 | $38,322 | 10.09% |
| $10,000 (no fees) | 3 years | $313.36 | $11,281 | 8.00% |
| $10,000 with $1,500 of fees | 3 years | $360.37 | $12,973 | 17.77% |
The fees are the same in dollars on both loans. On the smaller loan they are a much larger share of the money borrowed, and they are spread over three years instead of five, so they move the needle more than four times as far: 2.09 points on the larger loan, 9.77 on the smaller. That is the arithmetic behind ASIC’s point about fees on low-value loans.
Lower interest rate, higher comparison rate
Moneysmart gives its own example: two lenders each offer $10,000 over three years. One charges 3% interest with a comparison rate of 6%; the other charges 4% with a comparison rate of 4.5%. The second may cost less overall, despite its higher interest rate.
Moneysmart’s reminder is to check that the comparison rates being compared are for the same loan amount and term.
Moneysmart also says comparison rates are only accurate for the example given and that lenders must say what assumptions they used. Comparison websites can help, it says, but they are businesses that may earn money from promoted links and may not show every option.
What to read beside the rate
- The amount and term the comparison rate was worked out for, and whether it is for a secured or unsecured loan.
- Any early repayment fee, which the warning says is not included. The paying early guide covers it.
- Default fees and default interest, which Moneysmart lists among car loan fees.
- The total repaid, which Moneysmart’s personal loan calculator works out from a rate, fees and term.