Car Loan vs Mortgage Top-Up – What’s Cheaper in NZ (2025)
Thinking about topping up your mortgage to buy a car? You’re not alone. It’s a common strategy, but it’s not always the smartest. In this guide, we’ll compare both options — and show you how to save thousands over the long run.
Is a Mortgage Top-Up Cheaper Than Car Finance in NZ?
While a mortgage top-up might offer a lower interest rate, the **real cost** comes from the much longer repayment period. That means you pay interest for 20–30 years — even for a car that may last only 10.
- Mortgage rate: ~6.5%
- Car loan rate: ~12.95%
- Mortgage term: 25–30 years
- Car loan term: 3–5 years
Real Example – $20,000 Car Loan vs Mortgage Add-On
Let’s compare the same $20,000 car purchase using both options:
| Option | Term | Interest Rate | Total Interest Paid |
|---|---|---|---|
| Mortgage Top-Up | 30 years | 6.5% | $25,000+ |
| Car Finance | 5 years | 12.95% | ~$5,400 |
Saving with car finance: ~$19,000 in interest alone.
Pros & Cons of Using a Mortgage for a Car
| Mortgage Top-Up | Car Loan |
|---|---|
| Lower interest rate | Shorter repayment term |
| Higher long-term interest | Lower total interest paid |
| Harder to track vehicle cost | Easier to repay early |
| Increases mortgage burden | No impact on home equity |
How to Save on Car Loans in NZ
- ✅ Choose a secured vehicle loan
- ✅ Make additional repayments to reduce interest costs
- ✅ Use a trusted dealership like Dave Allen Motors
- ⚠ Avoid applying to multiple lenders at once (affects your credit)
Why Use Dealer Finance Instead of Your Bank?
- Faster approvals — get on the road sooner
- Access to multiple lenders and better rates
- Simplified process with expert help
- Works well even if you're self-employed or new to NZ
Ready to Save?
At Dave Allen Motors in Hamilton, we’ve helped thousands of Kiwis get the right finance deal — without touching their mortgage.
Apply online now or learn more about no deposit options.