Car Finance Fees Under Scrutiny as ASIC Flags Borrower Risks

The regulator examined data from more than 350,000 loans across eight car finance providers and identified concerns around third party distribution, sales practices and how lenders monitor consumer outcomes. ASIC’s findings suggest some lenders have not kept a close enough eye on how loans are sold by intermediaries such as dealers and brokers, even though those arrangements can directly affect the borrower’s final cost and experience.

One key issue was fees. ASIC found that car loans often involved both lender establishment fees and distributor establishment fees, with charges varying widely between providers. For borrowers taking out lower-value loans, these upfront and added costs can make a meaningful difference to affordability. A loan that appears manageable based on repayments alone may become far more expensive once establishment fees, ongoing charges, late payment costs and insurance add-ons are included.

The review also highlighted hardship concerns. Some borrowers who fell behind on repayments experienced inconsistent support, and some still owed substantial amounts after their vehicles were repossessed and sold. For households relying on a vehicle to get to work, study, medical appointments or family commitments, this can create a serious financial and practical setback.

This story extends the warning raised by recent enforcement action against Money3, but the broader message is not limited to one lender. Borrowers should take time to read the loan contract, check whether a broker or dealer is being paid a fee, and ask how the lender assesses affordability. If the answer is unclear, pause before proceeding.

For Australians comparing small loans, the practical takeaway is simple: do not judge a loan by speed alone. Fast approval can be useful in an emergency, but it should not come at the expense of transparency. Before applying, borrowers can compare finance options, review all fees and estimate repayments against their regular income and essential expenses.

Responsible borrowing starts with knowing the full cost before you commit. If repayments may become difficult, contacting the lender early and seeking free financial counselling can help protect your options before the situation worsens.