Car loan vs personal loan: broker, bank or dealer

A car loan is usually secured against the car you buy, which tends to bring a lower interest rate. A personal loan is often unsecured and can pay for anything, including an older car, rego and insurance, but Moneysmart says unsecured loans usually have higher interest rates. The second choice is where the loan comes from: your bank, a finance broker or the car dealer.

That second choice can cost as much as the first. ASIC’s June 2026 review of more than 350,000 car loans found fees varied widely, and loans typically carried 2 establishment fees, one to the lender and one to the broker or dealer.

Car loan vs personal loan: the key differences

The main difference between a car loan and a personal loan is security. With a secured car loan, the lender can take and sell the car if you do not keep up repayments. With an unsecured personal loan, nothing is tied to the loan, so the lender takes on more risk and usually charges more for it.

	Secured car loan	Unsecured personal loan
Security	The car you buy	None
Interest rate	Usually lower	Usually higher
What it can pay for	The car	The car, plus rego, insurance, repairs or anything else
Which cars	Often limits on age, such as new or under 7 years at CommBank, or up to 10 years at People First Bank	No vehicle limits, so older cars and private sales are easier
If you cannot repay	The lender can repossess and sell the car	The lender can take legal action to recover the debt
Typical term	1 to 7 years	1 to 7 years

Sources: Moneysmart car loans, Moneysmart personal loans, CommBank, People First Bank.

A secured loan usually suits a new or near-new car bought from a dealer, where the car qualifies as security. An unsecured personal loan usually suits an older car, a private sale, or a buyer who wants to borrow extra for on-road costs or does not want the car used as security. Some lenders also offer secured personal loans, so check what the lender calls the product and what it is actually secured against.

Security also affects what you can do with the car. With a secured car loan, the car stays security until the loan is repaid. With an unsecured loan, ING notes you can sell or modify the car without the lender’s permission.

How the rate changes a $30,000 car loan

The rate you are offered depends on more than the loan type. Moneysmart says lenders may look at your credit score, income, expenses and savings when they set your rate. ING, for example, advertised personal loan rates from 6.19% to 19.99% a year on 26 September 2026, based on your credit score and financial situation (ING).

Here is what the rate does to a $30,000 loan over 5 years, calculated by Compare A Broker. The rates are illustrative, not quotes:

Interest rate	Monthly repayment	Total interest over 5 years
7%	$594.04	$5,642.16
9%	$622.75	$7,365.04
11%	$652.27	$9,136.36
13%	$682.59	$10,955.53

Every 2 percentage points adds about $1,700 to $1,850 in interest over 5 years. The loan term matters too: Moneysmart says a longer term may lower your repayments but increases the total cost. Compare the comparison rate, not the headline rate: Moneysmart says the lender must give you the comparison rate, which includes the interest rate and fees. Compare loans of the same amount and term.

Fixed or variable rate on a car loan

A car loan or personal loan can have a fixed or variable interest rate. With a fixed rate, your loan repayments stay the same for the loan term. With a variable rate, repayments rise or fall with the lender’s rates. Moneysmart says variable rate car loans usually do not have an early exit fee, while fixed rate loans may charge a fee if you repay early. If you plan to pay the car off ahead of schedule, check that fee first.

Balloon payments lower repayments, not the cost

A balloon payment on a car loan, also called a residual, is a lump sum you pay at the end of the loan in exchange for smaller regular repayments. Moneysmart warns the total cost of the loan is generally higher, because you repay the lump sum with interest.

On the same $30,000 loan at 9% over 5 years, a 30% balloon of $9,000 cuts the monthly repayment from $622.75 to $503.43. Total interest rises from $7,365.04 to $9,205.53, and you still owe the $9,000 at the end. Moneysmart’s advice is to be confident you will have the money when the balloon falls due.

3 ways to get car finance: bank, broker, dealer

Whichever loan type you choose, it can reach you in 3 ways.

	Your bank	Finance broker	Dealer finance
Lenders compared	1	Several, from the broker’s panel	Often 1 or 2 lenders the dealer works with
Who arranges it	You	The broker	The dealer, at the point of sale
Extra fees to check	Lender fees only	Lender fees plus any broker fee	Lender fees plus any dealer or introducer fee
Best suited to	A strong credit history with a bank that already knows you	Comparing lenders, or a less simple credit profile	Checking a manufacturer promotion against other offers

Moneysmart says you can compare car loans from your own bank with other banks and financial institutions, and car dealerships. It also says people selling cars can use high pressure sales tactics. Know your budget, the best rate you can get and your repayments before you visit the dealer. Getting pre-approval from your bank or a broker first lets you compare the dealer’s offer against a real number.

How car finance brokers and dealers are paid

A car finance broker is usually paid a commission by the lender when the loan settles, and Westpac notes that commission may influence which loans you are shown (Westpac). A broker may also charge you a broker fee. Moneysmart says a broker fee is a one-off fee that must be disclosed on the finance contract. A dealership or introducer fee works the same way for a dealer who refers you to a lender.

ASIC’s 2026 review found car loans typically carried 2 establishment fees (ASIC REP 832):

• a lender establishment fee of $299 to $995;
• a distributor establishment fee, paid to the broker or dealer, from a flat $912 up to $2,500.

In the worst case ASIC found, one borrower paid over $9,000 in fees on a $49,162 car loan. That is why Moneysmart says to ask who is involved in the loan, and what fees each of them charges, before you sign.

One old practice is gone. ASIC banned flex commissions in car finance from 1 November 2018. Before the ban, lenders paid dealers and brokers more commission the higher the interest rate they set (ASIC).

Car finance brokers and the best interests duty

A car finance broker is not bound by the best interests duty that applies to mortgage brokers. The National Consumer Credit Protection Act defines a mortgage broker by credit assistance on loans secured by mortgages over residential property (section 15B), and the duty in section 158LA applies to mortgage brokers. A car loan is not secured by a mortgage over your home.

A car finance broker still has obligations. It must hold an Australian credit licence or be a credit representative of a licensee (ASIC), and ASIC’s responsible lending guidance applies to credit assistance providers, including mortgage and finance brokers. A broker must not suggest or help you apply for an unsuitable loan. That means one you could not repay, could only repay with substantial hardship, or that does not meet your requirements (ASIC RG 209).

In practice, ask a car finance broker which lenders they compared, what the broker is paid on your loan, and why they chose that loan for you. You can check a broker’s credit licence on ASIC’s register before you share your documents.

Dealer finance: what to check before you sign

Dealer finance is convenient, because it is arranged on the spot. Moneysmart warns that the fine print may say you are paying fees to several people, including a broker as well as the lender. Take the paperwork away and compare it with an offer from your bank or a broker.

Watch the add-on insurance too. Under the deferred sales model, a seller must wait at least 4 days after you commit to buying the car before offering you add-on insurance. That includes consumer credit insurance and tyre and rim insurance (ASIC RG 275). Comprehensive car insurance is exempt from the pause. The 4 days give you time to decide whether you need the cover at all.

Will several car loan applications hurt your credit score?

Several applications in a short time can hurt your credit score. Moneysmart says to be careful applying for a lot of loans, because this can hurt your credit score. A broker who checks your situation against lender criteria first may mean fewer applications. A broker’s panel does not cover every lender, though, so ask which lenders they compared.

When to use a broker or go direct

Going direct to your bank is usually simplest when your credit history is strong and the car qualifies as security. Check your bank’s rate against 2 or 3 other quotes first. A broker usually adds the most when your credit history is short or patchy, or your situation is less simple and suits a specialist lender. It also helps when you want several lenders compared without applying to each one. Dealer finance is worth taking when a manufacturer’s promotional rate beats both, after fees. Check the conditions first: ING notes dealer finance can come with balloon payments, higher vehicle prices or limits on which cars you can buy.

Whichever route you take, compare the comparison rate, every fee and the total cost over the full term, for the same loan amount and term.

Finding a car loan broker in Perth

256 businesses are listed in our car and personal loans directory. For a home loan version of the same decision, see mortgage broker vs going direct to the bank.

Checked against Moneysmart, ASIC, the National Consumer Credit Protection Act and lender pages on 26 September 2026. This is general information, not financial advice. It does not consider your objectives, financial situation or needs.

Frequently asked questions

Is a car loan or a personal loan better?

A secured car loan usually has a lower interest rate than an unsecured personal loan, because the car is security for the lender. A personal loan suits an older car, a private sale or borrowing extra for rego and insurance. Compare the comparison rate and fees of both for the same amount and term.

Can I use a personal loan to buy a car?

Yes. A personal loan can pay for a new or used car from a dealer or a private seller. An unsecured personal loan does not use the car as security, but the interest rate is usually higher than a secured car loan.

How much does a $30,000 car loan cost a month?

At an illustrative 9% a year over 5 years, a $30,000 car loan costs about $622.75 a month, with $7,365.04 in total interest, calculated by Compare A Broker. At 7% the repayment is about $594.04, and at 13% about $682.59. Fees come on top.

How do car finance brokers get paid?

Car finance brokers are usually paid a commission by the lender, and may charge you a broker fee, which Moneysmart says must be disclosed on the finance contract. ASIC’s 2026 review found distributor establishment fees from $912 to $2,500.

Is dealer finance a bad idea?

Not always. Dealer finance is convenient and a manufacturer’s promotional rate can be competitive. Moneysmart warns you may pay fees to several parties, including a broker, and add-on insurance cannot be offered until at least 4 days after you commit to the car. Compare the dealer’s offer with your bank or a broker before you sign.

Must car finance brokers act in my best interests?

The best interests duty in the National Consumer Credit Protection Act applies to mortgage brokers, not car finance brokers. A car finance broker must still be licensed and must not help you into a loan that is unsuitable for you.