Buying a car is one of the biggest financial commitments you’ll make. However, most buyers focus solely on the Annual Percentage Rate (APR) and the monthly payment, leaving them vulnerable to "junk fees."
If you want to avoid overpaying, you need to look beyond the sticker price. Here are the five most common hidden fees in car finance and how to negotiate them.
The dealer delivery fee is charged by the dealership to cover the cost of preparing the vehicle for handover. This can include cleaning, pre-delivery inspection, paperwork processing, and admin.
If your vehicle is written off, your comprehensive insurer will pay out the market value or agreed value under your policy. If your loan balance is higher than that payout, you are responsible for the shortfall.
It is common for dealerships to offer additional products during the finance process, often presented as “only a few dollars a week.” These costs are typically added to the loan amount, which means you pay interest on them.
Common add-ons in Australia include:
• Paint protection and interior protection
• Extended warranties
• Tyre and rim insurance
• Loan protection or consumer credit insurance
What to watch for: These products are not required for loan approval. If you are told a product must be included for finance to proceed, that is a red flag. Always request a breakdown of what is being added to the loan and confirm the total amount being financed before signing.
Sometimes a dealership may offer a sharper vehicle price on the condition that you use their preferred lender. While this can work in some situations, it is important to look beyond the car price.
Lower purchase price does not always mean lower overall cost.
Your total loan cost includes:
Principal + Interest + Fees
If the interest rate is higher, or establishment and ongoing fees apply, the total repayment over five or six years can exceed the savings on the purchase price.
Always compare the full finance proposal, not just the sale price of the car.
Many buyers plan to refinance or pay out their car loan early. However, depending on the type of loan, early termination fees or break costs may apply.
With fixed rate consumer loans, interest is often calculated in a way that means the majority of interest is paid earlier in the term. Paying out early does not always mean a dramatic interest saving.
Before signing, ask:
• Are there early repayment fees?
• How is interest calculated?
• What is the estimated payout figure at 12, 24 or 36 months?
Can I negotiate dealership fees?
Government charges such as stamp duty, registration and CTP are fixed. However, dealer delivery fees, protection packages and aftermarket products are generally negotiable.
What is a hidden finance charge?
A hidden finance charge is any cost added to the loan that is not the vehicle itself. This can include warranties, insurance products, protection packages or inflated establishment fees that increase the total amount financed.
Do not focus solely on the weekly repayment. Focus on the drive-away price and the total amount repayable over the loan term.
If a fee cannot be clearly explained, or if additional products appear in the contract that were not discussed, pause before signing. Once documents are executed, your options become more limited.
If you are unsure about the structure of your car loan or the fine print in your contract, have it reviewed before you commit.
We specialise in transparent vehicle finance and structuring loans correctly from the outset, whether personal or business.
Enquire With Us Today for a no-obligation consultation.
