Car lenders hold or cut rates despite RBA hike, says Savvy

Most car lenders have not passed on the Reserve Bank’s latest rate rise, with some cutting their rates, according to finance comparison site Savvy.

The RBA lifted the cash rate by 25 basis points to 4.85% last week, its fifth increase this year. Savvy says only four of the top 20 car loan rates in its database rose after the decision.

The average car loan rate offered through Savvy to customers with good credit is 7.79% in November, down three basis points from 7.82% in October. The lowest rate is 6.95% for non-EVs.

One of Savvy’s lending partners cut its minimum car loan rate by 1.5 percentage points compared with October. Savvy says lenders sometimes cut rates by one to two percentage points at a time to stand out and drive business for several months.

Car loan rates have still risen over the year. Savvy says they were as low as 5.85% within the past 12 months, and only a few lenders now offer rates below 7%. The average mortgage rate rose from 5.51% to 6.20% in the 12 months to September.

Savvy managing director Bill Tsouvalas says the crowded car loan market, and the shorter term of the finance, makes lenders more willing to move against the trend.

“Lenders are more willing to go against the grain when it comes to interest rates on their car loan products. Car loans have traditionally started 150 to 200 basis points higher than home loans, but with mortgage providers continuing to pass on rate rises while many car financiers don’t, that gap is now closer to 50 basis points,” Tsouvalas says.

“That makes taking the time to consider your car finance options all the more crucial. Car loan rates are also nearly always fixed, meaning consumers benefit from budgeting certainty and lenders benefit from knowing what their return will be.”