The RBA had its final meeting for 2025 in December, keeping rates on hold until its first meeting of 2026 in February. While many leading economists and banks had further cuts pencilled in for the early stages of next year, the rise of inflation back up to a high of 3.8% has caused plenty to not only walk back their predictions but reverse course entirely.
This week, the Commonwealth Bank joined NAB in revising its forecast for February to a 25 basis point increase. Meanwhile, Westpac has ruled out any cuts in 2026 after having previously backed further decreases in May and August.
Talk of rates being back on the up should pique the attention of those currently in the market for their next car, as it means your rate could be fixed at a higher level. So, what might RBA hikes mean for your car loan?
How potential rate hikes impact car loans
If you’re currently paying off your car loan with a fixed interest rate, the good news is that it won’t be impacted at all (unless you refinance it to a different deal). You’ll stay on the same rate until your loan is paid out.
However, once these hikes come into effect, the interest rate you’re offered is likely to be 0.25% p.a. higher. You can see in the table below how much of a difference this can make to your overall interest spend:
| Loan amount | 5.85% p.a. | 6.10% p.a. | 7.50% p.a. | 7.75% p.a. | 10.00% p.a. | 10.25% p.a. |
|---|---|---|---|---|---|---|
| $25,000 | $3,895 | $4,069 | $5,057 | $5,235 | $6,871 | $7,055 |
| $50,000 | $7,789 | $8,138 | $10,114 | $10,471 | $13,741 | $14,111 |
| $75,000 | $11,684 | $12,207 | $15,171 | $15,706 | $20,612 | $21,166 |
| $100,000 | $15,579 | $16,276 | $20,228 | $20,942 | $27,482 | $28,222 |
| Calculations are based on a five-year car loan repaid monthly and are for illustrative purposes only. Rates aren’t necessarily reflective of the rates you’ll receive on your car loan. | ||||||
As you can see, while the impact isn’t massive, it’s still worth taking into account. On a $50,000, five-year car loan, locking in a 7.50% p.a. rate before the hikes take effect would save you more than $350 across your loan term. If you’re buying a $75,000 car, that goes up to well over $500.
It’s important to keep in mind that we might not be limited to a single rate hike. After all, NAB is projecting a second increase in May. If you still hadn’t taken out your car loan by that point and the RBA bumped up the rate by an additional 0.25%, that $50,000 car loan would set you back over $700 more, while the $75,000 vehicle creeps up to more than an additional $1,100.
The hidden drawback of higher car loan rates
"While an interest rate rise might mean only a few hundred dollars extra paid over the life of a car loan, the bigger implication is on getting approved. For homeowners, a rate rise means more money towards their mortgage each month, which decreases their car loan serviceability. This could result in a reduction as high as 3% on their borrowing capacity."
So, should you buy your car now?
Getting in early and buying your car before February means that you’ll sidestep an interest bill that could potentially be hundreds of dollars more than if you waited it out. Every dollar counts, so you might look at any opportunity you can to minimise the cost of your finance deal.
You might also find that the end of the calendar year is one of the best times to buy your car, given that dealers are clearing out soon-to-be-outdated stock and meeting annual or quarterly sales targets.
On the flip side, though, that might not be much when contrasted with an interest bill in the thousands or tens of thousands in the grand scheme of things. If buying your car now means saving money but missing out on your ideal car, it may not be worth it for you. It all comes down to your preferences as a borrower.