Bank Australia's 2025 IC Engine Ban - Ken Research on the Australia Car Finance Market Reset
Author : yash tiwari | Published On : 28 Apr 2026
The Australia car finance market is in active structural transition, driven not just by consumer demand but by a policy decision that has drawn a hard line through the lending landscape. In August 2022, Bank Australia announced it would stop issuing loans for internal combustion engine vehicles from 2025, committing its lending book exclusively to hybrid and electric vehicles. This is not an isolated ESG gesture it signals the direction that Australia's broader banking system is heading, with direct consequences for lender positioning, product design, and competitive strategy across the entire car finance market. Post-COVID consumer behaviour has reinforced this transition: Australians who previously preferred full cash purchases discovered the financial logic of EMI-based financing during the pandemic, and car finance loan volumes have continued rising since. The market spans passenger vehicles, commercial vehicles, new and used vehicle financing, and a lender ecosystem covering NBFCs, universal and commercial banks, and captive finance companies.
The Australia car finance market report by Ken Research covers segmentation by vehicle category, ownership type, lender category, and loan tenure across the 2018-2028 forecast period. Ken Research profiles 15 competitive players including Toyota Finance Australia, National Australia Bank, ANZ Banking Group, Commonwealth Bank, Car Clarity, Driva, Stratton Finance, and Fingo Finance alongside the regulatory frameworks and consumer behaviour shifts shaping lender strategy through 2028.
Key Market Indicators - Ken Research
- Report Period: 2018 to 2028F
- Leading Vehicle Category: Passenger Vehicles
- Leading Ownership Segment: Used Vehicles
- Leading Lender Category: Universal and Commercial Banks
- Post-COVID Trend: Sustained rise in EMI-based car finance loan volumes
- EV Policy Trigger: Bank Australia stops IC engine loans from 2025
- AUD 6.1 Mn: Australian Government EV charging infrastructure investment (February 2022)
- Key Competitive Parameters: Loan tenure, interest rate, ease of procurement, down payment flexibility
Australia Car Finance Market Segmentation - Where Demand Concentrates and Why Each Segment Behaves Differently
Understanding how demand distributes across Australia's car finance market requires separating four distinct segmentation dimensions. Ken Research maps each independently because the leading segment in one dimension does not predict leadership in another.
| Segmentation Dimension | Leading Segment | Why It Leads | Secondary Segment |
|---|---|---|---|
| Vehicle Category | Passenger Vehicles | Dominant personal ownership category; EV policy shift driving new financing product design by major banks | Commercial Vehicles |
| Ownership Type | Used Vehicles | Lower purchase price, affordable EMI entry point for consumers with reduced purchasing power; 30% down payment model reducing financial barrier | New Vehicles |
| Lender Category | Universal and Commercial Banks | Scale, trust, and balance sheet depth; NAB, ANZ, Commonwealth Bank, and Westpac anchor the institutional lending market | NBFCs (fastest growing) |
| Loan Tenure | 25-48 Months | Balances monthly affordability with total interest cost; preferred tenure band across both new and used vehicle financing | 12-24 Months |
Used vehicle financing deserves specific attention as the segment that has most durably benefited from Australia's macroeconomic conditions. With Australia operating at a lowered GDP growth rate and constrained consumer purchasing power, used vehicles offer personal mobility at a price point that new vehicle financing cannot reach. Dealers and OEMs have reinforced this by offering improved maintenance plans, longer-life services, and structured discounts that make used vehicle ownership progressively more comparable to new vehicle ownership in terms of lifecycle cost. As Ken Research identifies in its car finance market segmentation analysis, used vehicle financing is not a fallback segment it is the volume anchor of the Australian car finance market.
NBFCs and Captives Are Gaining Ground on Banks - What the Lender Competitive Shift Means for Market Strategy
Universal and commercial banks hold the dominant position in the Australia car finance lender landscape, anchored by the Big Four NAB, ANZ, Commonwealth Bank, and Westpac. Their advantages are structural: established consumer trust, branch distribution, balance sheet scale, and existing customer relationships that enable cross-selling car finance products into current account and mortgage customer bases.
However, the competitive parameters driving lender selection loan tenure flexibility, interest rate competitiveness, ease of loan procurement, and down payment affordability are precisely the dimensions where NBFCs and captive finance companies are building competitive differentiation. Toyota Finance Australia operates as a captive lender with a direct alignment between vehicle sales incentives and financing terms, creating an integrated deal structure that bank lenders cannot replicate through product design alone. Newer digital-first players including Driva, Car Clarity, and Zoom Car Loans are competing on procurement ease and speed of approval, reducing the friction that has historically favoured branch-based bank lending.
The Australia Used Vehicle and Auto Finance Market tracked by Ken Research, valued at USD 25 billion, maps how this same lender fragmentation plays out in the used vehicle segment specifically where NBFC and fintech lender penetration is higher than in new vehicle financing, driven by the underserved credit profiles that traditional banks have historically deprioritised.
The EV Financing Transition - How Bank Australia's 2025 Decision Is Forcing a Product Redesign Across the Lender Market
The single most consequential structural event in the Australia car finance market is Bank Australia's commitment to cease IC engine vehicle loans from 2025. The implications extend far beyond Bank Australia's own lending book. When a regulated deposit-taking institution formally exits a product category on ESG grounds, it signals a direction that institutional investors, regulators, and peer lenders read as a leading indicator of systemic change.
The Australian Government's February 2022 investment of AUD 6.1 million to accelerate JET Charge's EV charging infrastructure rollout addresses the infrastructure gap that has been the primary consumer hesitation around EV adoption. As that infrastructure gap narrows, the financing barrier becomes the next friction point and lenders that have already built EV-specific loan products, fringe benefits tax-aligned financing structures, and novated lease frameworks for electric vehicles will have a product distribution advantage over those still designing for the transition.
Ken Research documents this EV financing transition as a material competitive differentiator in the Australian car finance competitive landscape, noting that lenders who position EV financing as a product category rather than a vehicle-type checkbox will capture disproportionate share of Australia's passenger vehicle financing growth through 2028. The Australia Car Finance and Leasing Services Market analysis by Ken Research, valued at USD 16 billion, confirms that novated leasing is gaining traction specifically in the EV segment a product structure that aligns tax efficiency with the longer financing horizons that EV purchase prices require.
For the complete lender competitive landscape, market size data by segmentation, and forecast through 2028, download free sample for a detailed preview of the full Ken Research market analysis.
Conclusion
The Australia car finance market is being reshaped by three converging forces: used vehicle financing anchoring volume demand as consumer purchasing power remains constrained, post-COVID EMI adoption creating a sustained new loan demand base that did not exist at the same scale before 2020, and the EV financing transition introducing a structural product design requirement that will separate well-positioned lenders from those still operating on IC engine financing assumptions. Bank Australia's 2025 IC engine loan exit is not the market's ceiling it is the market's floor for what EV-aligned lending strategy now requires.
The Australia car finance market report by Ken Research provides the segmentation depth, lender competitive analysis, and regulatory mapping needed to build a financing strategy calibrated to where Australia's vehicle ownership and lending landscape is structurally heading through 2028.
FAQs
What segments drive the Australia car finance market?
According to Ken Research, the Australia car finance market is segmented by vehicle category (passenger and commercial), ownership type (new and used), lender category (NBFCs, universal banks, captives), and loan tenure (12-24, 25-48, and 49-60 months). Used vehicle financing leads the ownership segment driven by affordability and structured EMI models with 30% initial down payments, while universal and commercial banks NAB, ANZ, Commonwealth Bank, and Westpac hold the dominant lender position by balance sheet scale and consumer trust.
How is the EV policy shift affecting Australia's car finance market?
Ken Research highlights that Bank Australia's August 2022 announcement to stop issuing IC engine vehicle loans from 2025 is the most consequential regulatory signal in the market, committing the lender exclusively to hybrid and electric vehicle financing. Combined with the Australian Government's AUD 6.1 million investment in EV charging infrastructure announced in February 2022, this policy direction is accelerating lender product redesign across the institutional banking market toward EV-specific loan structures and novated lease products.
Who are the major lenders in the Australia car finance market?
As documented in the Australia car finance market report by Ken Research, the market is served by approximately 15 tracked players. The Big Four banks NAB, ANZ, Commonwealth Bank, and Westpac anchor the institutional lending landscape. Captive lenders including Toyota Finance Australia compete on integrated vehicle-financing deal structures, while digital-first NBFCs including Driva, Car Clarity, and Zoom Car Loans are gaining traction through faster approval processes and flexible tenure structures targeting used vehicle buyers.
What impact did COVID-19 have on the Australia car finance market?
Ken Research's market analysis identifies COVID-19 as a structural demand catalyst for car finance in Australia. Before COVID, Australian consumers preferred full cash vehicle purchases to avoid long-term EMI commitments. The economic disruption and financial uncertainty of the pandemic shifted consumer behaviour toward financed purchases spreading cost through monthly EMIs while preserving liquidity. Car finance loan volumes have continued rising post-COVID, with this EMI adoption creating a sustained demand base that Ken Research identifies as a durable structural change rather than a temporary financing preference shift.
