The Reserve Bank held the cash rate at 4.35 per cent on 12 August 2026, and its Monetary Policy Board meets again on 29 September. It is the number every rate story leads with. But the cash rate is not the rate on your loan, and in 2026 the gap between the two is wide. Here is what Australians are actually paying to borrow, and what sets the number on a car loan.
The cash rate is what banks pay, not what you pay
The cash rate is the interest banks earn on the balances they hold with the Reserve Bank overnight. It anchors the cost of money across the whole system, but it is a wholesale rate between financial institutions, not a retail one. Before a lender lends to you, it adds several margins on top: the cost of raising the funds it lends, the cost of running the business, a buffer for the risk that some loans are not repaid, and a profit. Those margins are the reason the rate you are quoted sits well above 4.35 per cent.
What borrowers actually paid in mid 2026
The Reserve Bank publishes the average rates lenders charge, updated five business days after each month ends. For July 2026, its figures show owner-occupier home loans on a variable rate averaging 6.24 per cent per annum on new loans, and 6.21 per cent on loans already on the books. Business lending sat higher again, averaging 7.44 per cent on new small-business loans and 7.46 per cent on outstanding balances. Against a 4.35 per cent cash rate, that is a margin of close to two percentage points on a typical home loan, and more than three on business borrowing. The wholesale rate and the retail rate are simply not the same number.
Where car loans sit in the picture
The Reserve Bank does not publish a single average car loan rate, because that market is spread across banks, credit unions, non-bank lenders and dealer finance, each pricing very differently. As a rule, a secured car loan is priced below an unsecured personal loan, because the car itself is security the lender can recover if the loan fails. It usually sits above a home loan, though, because the term is shorter, the asset falls in value over the loan, and the amount is smaller so fixed costs weigh more per dollar borrowed. Rather than chase a single headline figure, the useful move is to compare current offers side by side on our car loan rates guide, and read the comparison rate, not just the advertised one.
The comparison rate does more work than the headline
The advertised rate is only the interest. The comparison rate folds in most standard fees to give a truer cost, which is why two loans with the same headline rate can cost different amounts. On smaller or shorter loans the fixed fees weigh more heavily, so the comparison rate can look much higher than the advertised rate. Reading both, on the same loan size and term, is the only fair way to line up two lenders. Our explainer on how the comparison rate works walks through why the second number usually matters more.
Why the gap is this wide in 2026
Margins are not fixed. They widen when a lender's own funding becomes more expensive or riskier, and they narrow when competition for borrowers heats up. Through 2026, funding costs have stayed high across the system, and lenders have priced carefully for the risk that some households are stretched. That keeps retail rates a long way above the cash rate even in a month when the Board does not move. It also means two borrowers at the same lender can be quoted different rates on the same day, because the risk buffer is set to each application rather than to the market as a whole. None of that shows up in the cash rate headline, which is one reason the headline is a weak guide to what your own loan will actually cost.
What actually moves your rate
- Credit history. A stronger record generally earns a lower rate, because it lowers the lender's risk buffer.
- Secured against the car, or unsecured. Securing the loan against the vehicle usually lowers the rate.
- The vehicle. Newer cars often attract sharper rates than older or higher-kilometre ones.
- Loan size and term. Very small or very long loans can carry higher pricing.
- Deposit. Putting money down reduces the amount financed and can improve the offer.
If the cash rate moves on 29 September
A change to the cash rate does not pass straight through to your loan. Variable rates can move over the following weeks if lenders choose to pass a change on, in full or in part, while a fixed car loan does not move at all until it ends. We explain the lag in detail in why car loan rates do not follow the cash rate, and if you want to read the decision itself, our guide to the three data releases before the 29 September decision sets out what to watch. If you are already in a loan set at a high rate, the lever in your hands is not the Board's decision but whether to refinance to a sharper offer. Before you do, run the numbers through our calculators so you are comparing the real cost, including any fees to switch.
What you can control
You cannot set the cash rate, and you cannot force a lender's margin down. What you can do is present as a lower risk, secure the loan against the car, keep the term no longer than you need, and compare the comparison rate across several lenders before you sign. In a year where the retail rate sits a long way above the cash rate, those choices are where the real saving is.
