Key highlights
- Interest rate is borrowing cost alone; comparison rate adds fees
- A low rate can hide a higher comparison rate
- Neither figure captures balloon or your exact structure fully
- Compare total amount payable across 80+ lenders for the real cost
The interest rate is the raw cost of borrowing, while the comparison rate combines that rate with most standard fees into a single figure meant to show a truer cost. A loan can advertise a low interest rate but carry a higher comparison rate once fees are included. Strong deals may start from around 6.55% p.a., subject to lender assessment. Because neither number tells the whole story on its own, Overdrive has Simon Kendrick compare 80+ banks and non-bank lenders on total cost, not just headline figures.
What the interest rate tells you
The interest rate is the percentage charged on the amount you borrow, and it directly drives your repayment. It is the number lenders advertise most prominently because it looks straightforward and competitive. On its own, though, it ignores the fees attached to the loan, so two deals at the same interest rate can cost different amounts. Think of the interest rate as the base price of the money, useful for a first glance but incomplete. For business vehicle finance, strong asset-backed deals may start from around 6.55% p.a., though your figure depends on the asset, ABN and credit profile and remains subject to assessment.
What the comparison rate adds
The comparison rate exists to make quotes easier to weigh fairly. It rolls the interest rate together with most standard fees, such as establishment and ongoing account charges, into one percentage based on a standard loan. Because it captures more of the real cost, a loan with a tempting low interest rate can reveal a noticeably higher comparison rate once those fees are baked in. That gap is a useful signal that a deal carries heavier fees than it first appears. Comparing the comparison rate across offers is generally a fairer guide than comparing headline interest rates alone.
Where both figures fall short
Neither number is perfect. The comparison rate assumes a standard loan amount and term, so it may not reflect your actual deal, and it cannot capture every fee, an early payout cost, or the effect of a balloon or residual. It also does not weigh flexibility features you might value, such as extra repayments. This is why the total amount payable over the full loan, alongside the actual repayment figure, is often the most honest comparison. Use the interest rate and comparison rate together as guides, then confirm the real total cost before deciding, keeping in mind all figures are indicative.
How to compare on the real cost
The reliable approach is to line up offers on the same amount, term, deposit and balloon, then compare the total amount payable, not just one percentage. That removes the risk of being drawn in by a low interest rate that hides high fees, or a comparison rate distorted by a structure unlike yours. Rather than doing this across many lenders yourself, Simon Kendrick submits one application to 80+ banks and non-bank lenders and presents the competitive options on a consistent basis, so you see genuine value. It also protects your credit file compared with applying everywhere separately. When you can see the interest rate, the comparison rate where disclosed, the fees and the total amount payable all laid out together, the genuinely cheaper option usually becomes obvious, and any deal relying on a flattering headline number quickly gives itself away.
Confused by the numbers on your quotes? Get a free, no-obligation comparison and Overdrive will translate the interest rate, comparison rate and fees into the real cost across 80+ lenders. There is no charge to see where you stand. Reach out today and let Simon do the comparison for you.
Frequently Asked Questions
Which matters more, the interest rate or comparison rate?
The comparison rate is usually the fairer guide because it includes most standard fees, whereas the interest rate shows borrowing cost alone. However, neither captures everything, so the total amount payable over the full loan is the most reliable measure. Use all three together rather than relying on any single figure.
Why is the comparison rate higher than the interest rate?
Because it adds most standard fees, such as establishment and ongoing charges, to the interest rate. A large gap between the two suggests the loan carries heavier fees. If the two figures are close, the deal has relatively low fees. Comparing this gap across offers helps you spot which loans are fee-heavy.
Does the comparison rate include a balloon payment?
Generally no. The comparison rate is based on a standard loan and typically does not reflect a balloon or residual, an early payout cost, or your exact structure. If your loan includes a balloon, ask for the total amount payable so you can see the real cost, since the comparison rate may understate it.
Do business loan quotes always show a comparison rate?
Not always. Comparison rate disclosure rules differ for commercial and business lending compared with consumer credit, so some business vehicle quotes may not display one. In that case, ask for the fees and the total amount payable so you can still judge the true cost, and compare offers on that consistent basis.
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