Comparison Car Loans Interest Rates

A comparison rate was introduced in 2003 to help consumers identify the true cost of a loan. It includes the car loans interest rate, loan fees both upfront and ongoing, and charges relating to a loan. It shows the rate to a single percentage figure to give a true comparison of the coast of the loan.

How is a comparison rate calculated?
Comparison rates are calculated on:
• the amount of the car finance;
• the term of the car loan;
• the repayment frequency (for example monthly payments or weekly payments);
• the interest rate charged; and
• Any fees and charges directly connected with the loan.

What doesn’t a comparison rate include?
• Government charges or taxes, such as stamp duty and mortgage registration fees.
• Any fees and charges which are not ascertainable (cannot be calculated) at the time the comparison rate is provided
• Any fees and charges which may or may not be occur and charged. They may depend on some event which may or may not occur. This may be an early termination fee or a late payment penalty.

When must I be provided with a comparison rate?
Comparison rates are provided for:
• Finance which is wholly or mainly for personal, domestic or household purposes and not proximately for business use.
• Fixed term credit or credit that must be repaid within a specific time period. (A car loan with a term of 5 years) An example of a loan that would not have to provide a comparison rate would by a credit card which does not have to be repaid within a particular time period.

From 1 July 2003 a comparison rate must be included in any advertisement for fixed term consumer credit which shows an interest rate by credit providers, car finance brokers, and businesses advertising goods that also refer to finance to a particular credit provider.

Consumers must be provided with comparison rate schedule which lists of the comparison rates for a standard range of finance amounts and terms.



Where can I get further information?

A list of frequently asked questions about comparison rates is available at www.creditcode.gov.au

Questions can also be directed to your nearest Fair Trading Centre.