Australia's car loan market is picking up speed, fast becoming a major growth opportunity for brokers. And with some lenders slashing variable rates to stay competitive, now is the right time for brokers to take the wheel.
"There are many brokers out there already writing a lot of car loans, and so that's a huge part of our business," Nigel Bradshaw, group treasurer and chief investment officer at MoneyMe, told Australian Broker. The non-bank lender offers car financing and loan solutions.
"But there's also a lot of mortgage brokers out there who haven't yet diversified their income across into the auto finance space," Bradshaw said. "And if I'm servicing a customer, and I've got a good relationship with a customer for their mortgage portfolio, or for their home, why not also be able to offer them car finance? It adds value to them, across their broader needs, rather than just sticking to mortgages only."
The key is knowing how to tap into the market, Bradshaw said. And now is the time, with the trend gaining momentum. Rising demand for electric vehicles and hybrids are shifting into high gear and unlocking big potential for asset finance brokers. In fact, consumer appetite for EVs and hybrids grew by roughly 50% in 2024, topping more than $6.17 billion in financing, according to a recent study by the Australian Finance Industry Association (AFIA).
Fueling the growing appetite for electric vehicle upgrades (with some consumers treating EVs like smartphones), pent-up buying demand from pandemic-related supply chain disruptions, rapid advancements in technology and faster loan approvals. Meanwhile, regulatory changes, along with small banks and non-banks entering the car finance space, is intensifying competition in the car loan market, offering more options to borrowers – and more channels for brokers to expand their offerings.
"Financing on cars has always been a key feature of the Australian market. It's just that traditionally, it was captive by two big banks: St George, which is now under the West Bank Group, and Macquarie Bank," Bradshaw said.
Most notable among the regulatory changes were the Australian Prudential Regulation Authority's (APRA) 1 January 2023 change that increased the capital requirements for banks when a loan originates via a third party, such as a car dealership or a finance broker. Higher capital requirements make these loans more expensive for banks to hold on their books.
"This was a game-changer for the industry," Bradshaw said. "Ultimately, the banks have sort of retreated out of the auto market and are just focusing on mortgages, because that's where they get the best bang for buck, and that's where they get the best return on capital. And so what that meant was there is an opportunity for other lenders to step into that space."
In the case of MoneyMe, the Sydney-based non-bank lender grew its auto car loan book from to $500 million within the first year of launching the car loan business, Bradshaw said. Helping drive the growing car loan market are non-banks like MoneyMe passing on variable rate reductions. In June, MoneyMe slashed its variable rates for secured car loans, in addition to mortgage loans. And with markets anticipating further rate cuts, consumer confidence and borrowing power are poised to strengthen even more.
"The Australian consumer very much understands variable rates," Bradshaw said. "This allows the repayments to change in line with the broader market conditions."
But there are other factors steering Australia's automobile market, such as faster approval times and evolving technology, both of which make it easier for borrowers to secure loans. At MoneyMe, Bradshaw said borrowers can be approved for a car loan – and drive away with their new vehicle – in under an hour.
"The fastest application we've ever had with full approval was three minutes," he said. "But generally, customers want to test drive the car. And of course, we can't automate the test drive.
"When the customer walks in, they see a vehicle; they like the vehicle. The salesperson, instead of handing them off to a broker, can actually give them a link right there," Bradshaw said. "Or, if there's an in-house broker in the dealership, they can send the link to the customer. The customer then just fills in all the details on their phone, on their app, and then we can basically do all the details in the background. And the dealer has already received the money in real time through the new payment platform infrastructure."
Julian Fayad, founder and chief executive officer of fintech startup LoanOptionsAI, added that as the technology around EVs become more sophisticated and commonplace, consumers will be more compelled to upgrade faster.
"There's all these great new models of these new electric cars," Fayad said. "And people are trying these electric cars. And with the nature of how fast technology is evolving now, people want to upgrade their cars more frequently than they used to. They see cars more as a technology product. Whereas people used to buy cars and then 10 or 15 years later, run them into the ground. Now, if you just look at technology, people are buying new iPhones and Samsung phones every couple of years.
"And the more cars become pieces of technology, the faster that people are going to upgrade them. Because very quickly the EVs become outdated and they're missing new features. So consumers want to upgrade and take advantage of these new technologies."
Brokers should be aware that the Best Interests Duty (BID) currently does not apply to auto finance brokers in Australia. While car loans are regulated credit products, asset finance brokers and car dealers arranging finance are not currently held to the same BID obligations as mortgage brokers.
"But of course, there's a chance that might come through over time," Bradshaw said.
However, auto finance brokers must still comply with the responsible lending obligations under the National Consumer Credit Protection (NCCP) Act, if providing regulated loans, and ASIC Act provisions.
