Indirect Loans in Australia: How They Work in 2025

Whether you’re eyeing a new car, dreaming of a home makeover, or simply want to upgrade your appliances, indirect loans are likely to cross your path. While direct loans from banks and credit unions are well-known, the indirect loan market has boomed in Australia—often quietly powering the financing behind big retail and automotive purchases. But what exactly is an indirect loan, and what should Aussies know before signing on the dotted line in 2025?

What Is an Indirect Loan?

An indirect loan is a type of financing where a third party—like a car dealership or retailer—acts as an intermediary between you and the lender. Rather than applying directly to a bank, you’ll fill out a finance application at the point of sale. The retailer or dealer then submits your application to one or more lenders on your behalf, often securing instant approval and letting you walk out the door with your new purchase the same day.

• Car finance: The most common example. Car dealerships partner with banks or finance companies, offering you loan options on the spot.
• Retail finance: Furniture stores, electronics retailers, and even some solar installers use indirect lending to offer payment plans or zero-interest deals.
• Broker-arranged loans: Mortgage brokers also fall under the indirect loan umbrella, though they’re regulated differently.

For consumers, the main attraction is convenience—one application, multiple potential lenders, and immediate results. But this convenience can come with trade-offs.

2025 Policy Updates: What’s Changed for Indirect Lending?

The past year has seen major reforms in Australia’s responsible lending laws, and indirect loan providers are under the microscope. In 2025, the following updates are reshaping the landscape:

• Stricter responsible lending checks: As of March 2025, all intermediaries must conduct more rigorous assessments of a borrower’s ability to repay, mirroring the standards expected of direct lenders.
• Fee transparency requirements: Retailers and car dealers must now disclose all commissions and referral fees upfront. This aims to prevent hidden mark-ups in the cost of credit.
• Comparison rate advertising: All finance offers arranged via indirect lending must clearly display the comparison rate, not just the headline interest rate, ensuring consumers see the true cost of borrowing.

These changes are designed to curb aggressive sales tactics and help Australians make informed decisions. ASIC’s 2025 review found that indirect loans, particularly in the car finance sector, had higher default rates than directly-arranged loans—a gap regulators are keen to close.

Pros and Cons of Indirect Loans: What to Consider

While the convenience of indirect loans is appealing, it’s important to weigh the benefits and drawbacks before proceeding.

• Pros:
  • Fast, streamlined approvals at the point of sale
  • Access to multiple lenders (sometimes resulting in more competitive offers)
  • Promotional deals, such as zero-deposit or 0% interest for a set period
• Cons:
  • Potential for higher interest rates, as intermediaries may prioritise lenders that pay higher commissions
  • Less negotiation power—offers may be less flexible than a direct bank loan
  • Additional fees or insurance products bundled into the loan

Real-world example: In 2025, a Melbourne couple bought a new SUV using dealership finance. While the process was quick, their loan included a $650 documentation fee and a slightly higher interest rate than their bank offered directly. However, they valued the ability to drive away the same day, and the dealership’s lender approved them despite a short credit history.

Tips for Navigating Indirect Loans in 2025

• Always ask for a breakdown of all fees, including commissions paid to the intermediary.
• Request the comparison rate, not just the advertised rate, to understand the true cost.
• Consider getting pre-approval from your bank or credit union before shopping—this gives you a benchmark for negotiations.
• Don’t be pressured into bundled products (like add-on insurance) you don’t need.
• Read the fine print: new regulations in 2025 have strengthened disclosure requirements, but it’s still up to you to check the details.

The Bottom Line

Indirect loans offer Australians speed and convenience, but they come with important considerations—especially as new regulations take effect in 2025. Whether you’re buying a car, furniture, or solar panels, understanding how indirect finance works empowers you to shop smarter, compare true costs, and avoid nasty surprises down the track.