Car Costs Are Rising: What Australian Drivers Should Check Before Borrowing Against a Vehicle
Registration, insurance, maintenance, and repayment costs all contribute to the true cost of keeping a vehicle on the road.
The cost of keeping a car on the road continued to rise in Australia during 2025. According to the Australian Automobile Association, benchmark transport costs increased by 1.6% across capital cities and 1.8% in regional centres.
Although costs increased, the AAA reported in its Q4 2025 Transport Affordability Index that affordability improved slightly as household incomes also rose, with outcomes varying by location. Even so, a repair or clustered annual bill can create an immediate cash-flow gap when your transport budget is already committed. That short-term pressure may lead you to compare finance secured against a vehicle you already own.
You may consider borrowing against a car you already own when facing a defined expense or temporary cash-flow problem. Vehicle-secured finance uses an eligible vehicle as security for a credit agreement: you keep driving the car, the lender takes rights over it under the contract, and, as the Australian Financial Security Authority explains, a security interest can be registered on the Personal Property Securities Register.
Vehicle-secured finance has a defined purpose, but it puts an essential asset behind a debt, making it a different proposition from an unsecured loan of the same size.
The question worth asking is not whether the repayment fits this month. It is what the agreement costs in total, whether you could still manage repayments if your income fell, and what your household could lose if you could not.
Important: When a vehicle is used as security, missed contractual repayments may put the vehicle at risk of repossession or sale.
The car used as security may also be the car you rely on
Using your car as security can put your access to work, family responsibilities and essential services at risk.
This risk can disappear when you compare vehicle-secured finance purely on rate and repayment. Losing the car would not just remove a possession; in much of Australia, it could remove your household’s way to reach work, take children to school or attend essential appointments.
If you live outside a well-served metropolitan area, limited transport alternatives may make continued access to your vehicle especially important.
If you are a sole trader whose ute is essential for earning an income, the vehicle supports both your mobility and your livelihood.
A new repayment may fit your budget under normal conditions, but default could put both your vehicle and your income at risk. In that situation, the consequences matter more than a small difference in repayment frequency. Losing the ute would not simply make the loan harder to repay; it could remove the income that was supposed to repay it.
That does not automatically make vehicle-secured finance unsuitable. Before borrowing against your car, you should start with the consequences of default, not the size of the weekly payment.
Why you are borrowing matters
Borrowing for a defined, one-off cost is fundamentally different from borrowing to cover a recurring budget gap.
A repair supported by a fixed quote, such as replacing a failed clutch or timing belt, is a defined expense. Registration and insurance are different because they recur, even if their payment dates create a temporary cash-flow squeeze. Borrowing for a specific repair spreads a known cost; borrowing repeatedly for recurring bills points to a broader affordability problem.
If your budget is regularly short, finance does not reduce the cost of running your car; it moves the cost into the future and adds interest. Where the shortfall is structural, a new repayment usually makes the following month harder rather than easier. The same applies if your repayment plan depends on something uncertain, such as a bonus, tax refund or sale proceeds that have not yet arrived.
Before comparing providers, write down four things: the exact purpose, the minimum amount required, the maximum repayment your budget can carry after fuel, insurance, registration and servicing, and what happens if your income drops for a quarter. If the fourth answer is blank, resolve it before an application, not after.
Five checks before borrowing against a car
You should compare the full agreement, not the advertised amount or scheduled repayment. These five checks test the costs, conditions and risks that determine whether the finance is workable for you.
1. The total amount repayable
The cheapest-looking repayment is not always the cheapest loan; the total amount repayable shows what the agreement will actually cost over its full term.
Ask for that figure in writing and confirm that it includes:
- The principal borrowed
- Interest over the full term
- Establishment and ongoing fees
- Any other charges built into the agreement
A longer term can reduce your weekly or fortnightly repayment while increasing the total amount paid. You should therefore compare products using the same loan amount and a similar term. Otherwise, a smaller scheduled payment can create a misleading impression of better value.
2. The comparison rate, read alongside the fee schedule
A comparison rate is useful for comparing loan costs, but it does not show every fee you may face.
ASIC’s MoneySmart guidance explains that, for consumer car loans covered by the comparison-rate requirements, lenders must provide a comparison rate that combines the interest rate with certain fees and charges into a single percentage. This helps you compare products on more consistent terms, especially when you use the same loan amount and term.
The figure still has limits. Late-payment fees, default costs, optional charges and some early-exit expenses may sit outside the comparison rate. You should therefore read the comparison rate and fee schedule together rather than treating either one as a complete picture of the loan’s cost.
3. Every fee, including the ones at the exit
Loan fees can increase the cost at the start, during repayment and when the agreement is closed.
Check for charges in three stages:
- At the start: establishment, application, valuation and PPSR-related fees
- During the term: account-keeping, payment-processing and late-payment fees
- At exit or default: early-payout, discharge, enforcement and default costs
Exit fees deserve particular attention because you may want to repay the loan early if your circumstances improve. A product with a competitive rate can still become expensive if closing the agreement attracts substantial charges. The lender should explain these costs before you sign, not only when you request a payout figure.
4. What default actually triggers
Default can result in extra fees, damage to your credit record, repossession of the vehicle and a debt that remains after the vehicle is sold.
Your contract should clearly explain what counts as default, when fees are added, what notices the lender will issue and when enforcement action can begin. Because vehicles depreciate while interest and recovery costs continue to accrue, the amount raised through a repossession sale may not fully clear your outstanding balance.
You should also understand the hardship and complaints process before signing. ASIC’s MoneySmart guidance says lenders may consider arrangements such as reduced repayments, payment plans or temporary changes after reviewing your circumstances. When you cannot resolve a complaint directly with the financial firm, the Australian Financial Complaints Authority, or AFCA, offers free and independent external dispute resolution for eligible finance complaints.
5. Eligibility and vehicle requirements before applying
Owning a car does not guarantee approval because the lender assesses both your finances and the vehicle you offer as security.
The assessment commonly covers:
- Income, living expenses and existing liabilities
- Credit history and recent credit enquiries
- Proof of ownership and registration
- Vehicle age, condition and estimated value
- Existing finance or security interests attached to the vehicle
Approval remains subject to credit assessment and eligibility criteria. Review the basic applicant and vehicle requirements before submitting a formal application. Multiple applications over a short period may result in several credit enquiries being recorded, so narrowing the field first can reduce unnecessary applications and make your comparison more deliberate.
Why funding speed is a poor basis for comparison
Funding speed says little about whether a vehicle-secured agreement will remain affordable or suitable for you over its full term. A form may take minutes, but a decision still depends on documents, checks and a signed contract. Timing varies by application and should not outweigh total cost, repayment resilience, vehicle conditions or default consequences.
When comparing car-secured loans in Australia, you can review the process outlined by AutoSwift Finance as one example before comparing applicable costs, eligibility requirements and repayment terms. Each provider sets its own product limits, rates, terms and vehicle conditions, and the current contract, credit guide and fee schedule remain the documents that matter.
What to weigh it against
Before borrowing against your car, compare the loan with non-credit alternatives, not only with other lenders. Depending on the expense, you might use part of your available savings while keeping an emergency buffer, ask a repairer whether non-safety work can be staged, compare unsecured finance, or sell a vehicle whose running costs no longer make sense.
If you are already behind on repayments, speak to your existing lender about hardship support before taking on new debt to cover the gap. The National Debt Helpline provides free financial counselling on 1800 007 007 and can help you review your whole household position without selling a product. You should not defer safety-critical work, but the way you fund it still deserves the same scrutiny as any other significant financial decision.
The judgement call
Using your vehicle as security can turn a short-term funding decision into a risk involving an asset that may be essential for work and daily life. Before proceeding, compare the total amount repayable, test the repayment against a realistic budget, and understand what happens if your circumstances change. Funding speed matters far less than whether the agreement remains manageable after the immediate expense has passed.
FAQs
Can you borrow money against a car you already own in Australia?
Yes. Some providers offer car-secured loans in Australia that use an eligible vehicle you already own as security. Approval still depends on credit assessment, eligibility criteria and the provider’s vehicle requirements, and missed contractual repayments can place your vehicle at risk.
What happens if you default on a car-secured loan in Australia?
Default can lead to fees, formal notices, repossession and sale of the secured vehicle. If the sale proceeds do not cover the outstanding balance and applicable costs, you may still owe money after the vehicle is sold.
Does a lower weekly repayment mean a cheaper car loan?
No. A lower weekly repayment can result from a longer term, which may increase the total amount repaid. The total amount payable, comparison rate, fee schedule and contract term provide a more reliable cost comparison than repayment frequency alone.
Important information
This article provides general information only and does not take into account your personal objectives, financial situation, or needs. Consider the applicable terms and seek independent advice where appropriate.
