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.
At Dave Allen Motors, we help customers across Hamilton, Waikato, and throughout New Zealand make smart decisions about car finance versus using their home loan.
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
✅ Is it cheaper to buy a car using my mortgage?
It can appear cheaper due to lower interest rates, but stretching payments over 20–30 years often means you pay much more overall in interest.
✅ What are the downsides of using my home loan for a car?
You risk paying more in interest over time, reducing home equity, and complicating your mortgage. A dedicated car loan is often better suited.
✅ What’s the benefit of using car finance instead?
Car finance offers faster repayment terms, fixed rates, and separates your car from your home investment, helping you manage debt more clearly.
✅ Can I repay a car loan early?
Yes, many car loans allow early repayment with little or no fee. At Dave Allen Motors, we work with lenders who offer flexible options.
Ready to Save?
At Dave Allen Motors in Hamilton, we’ve helped thousands of Kiwis get the right finance deal, without touching their mortgage.
Need help deciding between a bank mortgage and car finance? Apply online now or speak with our finance experts in Hamilton. We’re here to help you choose the option that fits your budget and goals.
Apply online now or learn more about no deposit options.