Should You Get a Car Loan Through a Mortgage Broker?

Why Mortgage Brokers Offer Car Loans

You might already know us for home loans, but we often handle vehicle finance for our clients as well. It makes sense when you think about the regulatory environment. Mortgage brokers are bound by the Best Interests Duty (BID) legislated in 2021.

This means we are legally required to prioritize your financial well-being.

The same principles that make brokers valuable for property apply here. We access multiple lenders to find a structure that suits your long-term goals. It is a different approach to the high-pressure sales environment of a car yard.

Car loan options comparison

Types of Car Finance

Secured Car Loan

This is the standard option for most private buyers in Australia. The vehicle acts as security for the loan, much like a house does for a mortgage.

Interest Rates: Typically lower (currently averaging 6.5% - 9% for good credit profiles).
Asset Risk: The lender registers an interest on the Personal Property Securities Register (PPSR).
Loan Terms: Usually fixed for 3 to 7 years.
Default Consequence: The lender can repossess the vehicle if payments stop.

Unsecured Personal Loan

You might choose this if the car is older or you want to avoid using the vehicle as collateral.

Interest Rates: Significantly higher (often 10% - 16%+).
Ownership: The car is yours outright from day one with no PPSR encumbrance.
Flexibility: You can sell the car at any time without needing to clear the loan immediately.
Approval Speed: these loans are often faster to approve but cost more over time.

Novated Lease

This is a salary packaging arrangement between you, your employer, and a finance company.

Tax Efficiency: Payments come from your pre-tax salary, lowering your taxable income.
EV Incentives: Under current legislation, eligible electric vehicles and PHEVs are exempt from Fringe Benefits Tax (FBT) up to the Luxury Car Tax threshold.
GST Savings: You do not pay GST on the vehicle purchase price or running costs.
Complexity: It requires your employer to agree to the arrangement.

Chattel Mortgage (Business)

This is the go-to structure for sole traders and companies using the vehicle primarily for business (more than 50%).

Immediate Deductions: You can claim the GST on the purchase price in your next BAS.
Asset Write-Off: Depending on current thresholds (check the 2026 instant asset write-off limits), you may be able to write off the full value immediately.
Ownership: The business owns the vehicle from the start.
Depreciation: You claim interest payments and depreciation as tax deductions.

Broker vs Dealer Finance

Dealer Finance

How it works: The Business Manager at the dealership arranges finance through their partnered lenders. It is designed for speed and convenience at the point of sale.

Potential issues:

Point of Sale Exemption: Dealers are not always subject to the same strict responsible lending obligations (NCCP Act) that brokers are.
Flex Commissions: While banned by ASIC in 2018, dealers still have volume-based incentives that favor the lender, not you.
Balloon Payments: Quotes often include a large final payment (balloon) to make weekly repayments look artificially low.
Proprietary Constraints: You are limited to the one or two brands that back the dealership.

Broker/Direct Finance

How it works: We arrange pre-approval before you even step onto the lot. This gives you the bargaining power of a cash buyer.

Advantages:

Best Interests Duty: We work for you, not the lender.
Negotiation Power: Dealers often drop the car price if they know you aren’t using their finance.
Credit Protection: We avoid “shopping” your credit file to multiple lenders, which protects your credit score.
Full Market Access: We compare dozens of lenders, including those that don’t deal with the public directly.

Factor	Dealer Finance	Broker Finance
Regulation	Point of Sale Exemption	Best Interests Duty (BID)
Interest Rates	Often Higher (Hidden in structure)	Transparent & Competitive
Lender Options	1-2 Partner Lenders	30+ Lenders
Credit Score Impact	High (Multiple inquiries common)	Low (Controlled submission)
Sales Pressure	High	None

Car Loan Rates: What to Expect

The advertised rate is rarely the rate you get. Lenders use “risk-based pricing,” meaning your specific profile dictates the offer.

Vehicle age impacts the rate:

New Car: Lowest risk for the lender, so you get the lowest rates.
Used (1-4 years): Rates typically sit 1-2% higher than new cars.
Older (5-7 years): Lenders view these as higher risk, often adding another 2-3% to the rate.
Classic/Vintage: usually requires a specialist personal loan or secured facility.

Loan amount limits:

Minimums: Most lenders require a minimum lend of $5,000 to $8,000.
Maximums: generally capped by your servicing capacity rather than a fixed number.

Your profile matters most:

Credit Score: A score above 800 (Equifax scale) unlocks “tier 1” rates.
Residential Status: Homeowners often receive a rate discount compared to renters.
Employment: Probation periods can limit your options to specific lenders.

Typical rate ranges (Secured Loans 2026):

Excellent Profile: 6.00% - 7.50%
Good Profile: 7.50% - 9.50%
Average Profile: 9.50% - 13.00%
Impaired Credit: 14.00% +

Note: These are indicative market observations and change frequently.

Car loan rate factors

The Impact of Car Loans on Home Loans

This is the most critical calculation for our clients. A car loan significantly reduces your borrowing power for a mortgage.

How it reduces borrowing: Banks don’t just look at the $600 monthly payment. They apply a “assessment rate” or buffer (typically 3% above the actual rate) to stress-test that debt.

This means a $600 monthly car commitment can reduce your home loan borrowing capacity by $70,000 to $90,000.

Strategic considerations:

Order of Operations: Buying the home first often maximizes your capacity.
Liability vs. Expense: A car loan is a liability that stays on your file; a lease is sometimes treated differently depending on the lender.
Debt Consolidation: We often see clients paying 12% on a car loan when they could incorporate it into a lower-rate mortgage (with strict repayment discipline).

Example Scenario: Sarah wants to buy a $500,000 home and a $40,000 car.

Option A: Buy car first ($600/month repayment)

Bank assesses the ongoing debt liability.
Her borrowing power drops by ~$85,000.
She may no longer qualify for the $500,000 property.

Option B: Buy home first, car later

She secures the home loan with maximum capacity.
We arrange the car finance after the home settlement is complete.

We model these scenarios for you so you don’t accidentally disqualify yourself from your dream home.

When to Use a Broker for Car Finance

Good reasons to use a broker:

1. You are planning to buy property We structure the car loan to minimize the impact on your future mortgage serviceability.

2. You want to protect your credit score Every time a dealer “checks” if you qualify, it leaves a footprint. We assess your file first to find the one right lender, preventing “credit shopping.”

3. You are self-employed Banks often struggle with sole trader financials. We know which lenders accept alternative income verification (Alt-Doc) for business owners.

4. You dislike confrontation We handle the paperwork and the lender negotiations. You just sign the documents.

5. You want genuine comparison We show you the “Comparison Rate,” which includes fees and charges, not just the headline interest rate.

When dealer finance might be OK:

1. Subvented Interest Rates Manufacturers sometimes subsidize the finance to move stock (e.g., 1.9% comparison rate). If the math checks out and the car price hasn’t been inflated to compensate, this is a good deal.

2. Convenience is your only priority If you are willing to pay a premium for the ability to drive away immediately without sending emails or documents, the dealer is faster.

Questions to Ask About Any Car Loan

Before signing:

What is the Comparison Rate? The advertised rate is marketing. The comparison rate includes the establishment fees and monthly charges.
Are there early termination fees (ETF)? Some fixed-rate loans charge an “economic cost” break fee if you pay them out early.
Is there a balloon payment? Ensure you know if you will owe a $15,000 lump sum at the end of the term.
Are the add-ons included in the finance? Dealers often add tyre and rim insurance or extended warranties into the loan amount, costing you interest on products you might not need.
Is the rate fixed or variable? While most car loans are fixed, some variable options exist. Know which one you are getting.
What are the monthly account keeping fees? A $10 monthly fee adds $600 to the cost of a 5-year loan.

Car Loans and Home Loan Refinancing

If you already have a mortgage, you might have the option to consolidate your car debt.

Potential benefits:

Cash Flow: It drastically reduces your total monthly outgoings.
Interest Rate: Home loan rates (e.g., ~6%) are generally lower than car loan rates (e.g., ~10%).
Simplicity: You manage one repayment.

Potential drawbacks:

Total Interest Cost: Paying off a car over 30 years costs far more than paying it off over 5 years.
Asset Mismatch: You will still be paying for the car long after you have sold it.

The Smart Workaround: We recommend setting up a separate “split” on your home loan for the car amount. You get the lower home loan interest rate, but you increase the repayments to pay that specific split off in 3-5 years.

Example Calculation: $30,000 car loan at 9% over 5 years:

Monthly repayment: $623
Total interest paid: $7,380

Same $30,000 consolidated into a 30-year home loan at 6%:

Monthly repayment: $180
Total interest paid: $34,460

You save cash flow now but lose $27,000 later unless you increase your repayments.

Gladstone Car Buying Tips

For resources workers:

FIFO/DIDO Considerations:

Usage: If your car sits at the airport or camp for two weeks a month, a high-interest loan is a waste of money.
Resale: Vehicles exposed to industrial fallout or salt air in the Gladstone region depreciate faster. Factor this into your loan term.

Budget wisely: Mining allowances can inflate your borrowing capacity on paper. We always advise borrowing based on your base rate, not your overtime or site allowance, to ensure safety during shutdowns.

For families:

Safety vs. Cost:

ANCAP Ratings: Newer cars have better safety tech. A slightly higher loan for a 5-star ANCAP car is often a better investment than a cheaper, less safe option.
Running Costs: A 4-cylinder SUV is cheaper to insure and fuel than a large 4WD.

For business owners:

Tax Structures:

Instant Asset Write-off: Check with your accountant if you qualify for the current small business support measures.
Logbooks: Keep a valid logbook for 12 continuous weeks to maximize your claimable percentage on a Chattel Mortgage.

How We Help with Car Finance

At AJ Home Loans, we view vehicle finance as one piece of your larger financial puzzle.

Holistic Assessment: We check how the car loan impacts your mortgage plans.
Market Comparison: We scan 30+ lenders to find the right policy for your credit profile.
Strategic Timing: We advise whether to buy the car before or after your next property purchase.
Single Contact: You deal with the same team that knows your financial history.
Unbiased Advice: We are paid by the lender, but our Best Interests Duty is to you.

Our car and personal loans service is complimentary for our clients.

Ready to Discuss Vehicle Finance?

You don’t have to navigate the dealerships alone. Whether you are looking for a new work ute, a family SUV, or refinancing an existing high-interest loan, we can run the numbers for you.

Book a free consultation to see how a broker-led car loan compares to the dealer’s offer.