Borrowing against a car you own in New Zealand
A loan against your car is a secured loan: you borrow cash and the lender takes your car as security. If you stop paying, the lender can repossess and sell it. It can be a legitimate product from a mainstream lender, or an expensive trap from a high-cost one, so the lender and the total cost matter more than the speed. Fair Finance does not arrange loans against a car you already own.
The short answer
A loan against your car, sometimes called a car equity loan or a secured personal loan, lets you borrow money using a car you own outright (or partly own) as security. You keep driving it. The lender gets the right to take it back and sell it if you default.
That risk is the whole story. A car is how many people get to work, school and the supermarket. Putting it up as security means a missed run of payments can cost you more than the debt. Before you go further, work out what happens to your life if the car goes.
How it works
- You apply for a personal loan and offer the car as security. The lender checks your income, spending and credit file. Under the Credit Contracts and Consumer Finance Act (CCCFA), it must make reasonable inquiries so the loan is affordable without substantial hardship. Nobody can promise approval, and lenders decide case by case.
- The lender values the car. It usually wants the car to be worth enough to cover the loan if it has to sell. How much of the value it will lend is up to the lender.
- The lender registers on the PPSR. The Personal Property Securities Register is a public online register of security interests. Once registered, anyone who searches the car will see the lender’s claim. Published lender fee schedules show PPSR registration fees of around $10 to $14. See our PPSR glossary entry.
- You receive cash and repay in instalments. Rates, fees and terms are in the credit contract. One lender’s published personal loan rates are 9.90% to 19.90% a year secured and 12.90% to 22.90% unsecured, with a $200 approval fee. Treat that as one example, not a norm.
- If you stop paying, the lender can repossess. More on that below.
If the car already has finance on it, the existing lender’s claim will show on the PPSR. A new lender will usually need to know about it, and your options narrow. Our page on selling a car with finance owing covers how an existing loan interacts with the car.
Who lends this way
- Banks, credit unions and personal-loan lenders. Some offer a secured personal loan with the car as security. The rate is often lower than an unsecured loan, since the lender carries less risk.
- Specialist and high-cost lenders. These lend on the car with higher rates and fees. Consumer Protection defines a high-cost loan as one with an annual interest rate of 50% or more.
- Mobile traders and pawn-style lenders. The same caps on high-cost loans apply to them. Read the contract before you sign and ask for the total repayable in writing.
For a plain-English comparison of the secured and unsecured types, see secured vs unsecured car loans and our glossary entry on a secured car loan.
The risks
You can lose the car. Consumer Protection says only items listed as security in the credit contract can be repossessed, and only licensed repossession agents can do it. Agents must show paperwork, and neither they nor debt collectors can use physical force or enter your home or garage by force. Repossession and debt collection must stop while you dispute the debt or apply for hardship.
You can still owe money after it is sold. After the car is sold your account is frozen, so no more interest or fees can be added. But if the sale price is lower than the debt, the shortfall is still owed. Consumer Protection’s example: $5,000 owed, car sells for $4,000, $1,000 still owed. You should get a statement of account from the lender seven days after the sale.
It damages your credit file. Consumer Protection notes that repossession negatively affects your credit rating. If that has already happened, our page on car finance after repossession explains how lenders see it.
A guarantor can be chased. If someone signed as guarantor on the loan, the lender can pursue them for the debt, including fees and interest. See our glossary entry on guarantors.
High-cost lenders and the CCCFA caps
A high-cost loan is one with an annual interest rate of 50% or more. For these loans Consumer Protection lists specific limits:
- lenders cannot ask you to repay more than twice the amount borrowed
- lenders cannot charge more than 0.8% of the unpaid loan balance in interest and fees per day, averaged across the term
- default fees for missed payments must be $30 or less
- no compound interest
So on a $2,000 high-cost loan, the most you can be asked to repay is $4,000. That is a ceiling, not a bargain. Paying $4,000 for $2,000 is expensive money even when it is legal. Credit and early repayment fees are not treated as interest, but they must be reasonable and cover costs closely related to what the fee is for. An unreasonable fee can be challenged in court.
Cheaper ways to borrow
Before putting the car on the line, check these:
- Free money advice first. MoneyTalks (0800 345 123, free, or text 4029) connects you with a financial mentor who can look at your whole budget. Sometimes the answer is renegotiating a bill, not borrowing.
- An unsecured loan from a bank or credit union. The rate is higher than secured, but you do not risk the car.
- A Good Loan from Good Shepherd. These are no-interest, fee-free loans for people on limited incomes, paid straight to the supplier. They can cover buying or repairing a car, up to $7,000 for a car purchase, and they are not for day-to-day costs, overdue bills or cash. Good Shepherd’s page lists income thresholds and says you are not eligible if you are on Single Jobseeker Support, if Work and Income can help with the purchase, or if your only income is self-employment. Applications take time, so it is not for urgent needs.
- Talk to the lender you already owe. If the problem is existing debt, ask about a hardship arrangement before borrowing more.
A worked example
These numbers are illustrative only. They show why the rate matters.
| Lender A | Lender B | |
|---|---|---|
| Loan | $5,000 | $5,000 |
| Rate (illustrative) | 12% a year | 22% a year |
| Term | 3 years | 3 years |
| Repayment per month (approx.) | $166 | $191 |
| Total repaid (approx.) | $5,980 | $6,875 |
The gap is about $900 over three years, before fees. Add a $200 approval fee and a PPSR fee and the total rises again. The repayment calculator will let you test your own numbers, but it is only a guide, since lenders set the rate after they assess you.
Where Fair Finance fits
Fair Finance does not arrange cash loans against a car you own, and this page is not a pitch for one. We are a referral service for people who want to buy a vehicle. We are not a lender, and we do not give personal financial advice.
If your real goal is a different car, for example a cheaper one that costs less to run, you can apply through us. One application and one soft credit check go to a panel of approved NZ lenders, and each lender decides case by case. We are paid by the lender only if a loan settles, and that never changes your rate. Our page on using a trade-in as a deposit explains how selling your current car can fund the next one. Start with the quick check.
Red flags
- A lender who only talks about the weekly payment. Ask for the rate, every fee and the total to repay.
- No affordability questions. Lenders must make reasonable inquiries. If nobody asks about your income and spending, be wary.
- A contract that lists more than the car as security. Consumer Protection says security should not be worth much more than the loan.
- Pressure to sign today.
- Anyone promising approval before they see your income and credit file.
Checklist
- Tried free budgeting help first (MoneyTalks)
- Checked Good Shepherd and unsecured options
- Know what happens if the car is repossessed
- Rate, all fees and total repayable in writing
- Checked the lender is registered and names its dispute resolution scheme
- Not borrowing more than the repayments allow after fuel, rego, insurance and repairs
General information only, not financial advice. Rules and lender products change, so check the official pages below.
Sources
Common questions
What is a loan against my car in NZ?
It is a personal loan where the car you already own is the security. The lender registers its interest on the Personal Property Securities Register (PPSR), you get the money as cash, and you keep driving the car while you repay. If you do not repay, the lender can repossess and sell the car.
Can a lender take my car if I miss payments?
Yes, if the car is listed as security in your credit contract. Consumer Protection says only licensed repossession agents can repossess, they must show paperwork, and they cannot use physical force. If the sale does not cover what you owe, you can still owe the shortfall.
Are there limits on what high-cost lenders can charge?
Yes. Consumer Protection says high-cost loans have annual interest rates of 50% or more. For those loans, lenders cannot ask you to repay more than twice the amount borrowed, cannot charge more than 0.8% of the unpaid balance a day in interest and fees on average, and default fees must be $30 or less.
Is there a cheaper way to borrow than using my car as security?
Often, yes. Options include an unsecured loan from a bank or credit union, a no-interest Good Loan from Good Shepherd if you meet its criteria, or free budgeting help from MoneyTalks first. Compare the total you will repay, not the weekly figure.
Does Fair Finance do loans against a car I own?
No. Fair Finance is a referral service for loans to buy a vehicle. If you want to buy a different car, you can apply through us and lenders decide case by case. We do not arrange cash loans secured on a car you already own.
See your repayments, then get a fair rate.
One application, one soft credit check, no obligation. We match you to the lender most likely to give you a fair go.