Dealer add-ons: what they cost once they're in the loan
At the finance desk, the car's price is settled and a second list appears: paint protection, window tint, an extended warranty, gap insurance, loan protection. Each one sounds small next to the car. Added to the loan, each one also collects interest for the whole term.
- An add-on in the loan costs its price plus interest. $2,900 of add-ons over 5 years at 12.1% costs $3,868.
- Every add-on is optional. Your automatic rights under the Australian Consumer Law apply whether or not you buy an extended warranty.
- Add-on insurance sold with a car, such as gap, tyre and rim, and loan protection, can't be sold to you until four days after you buy the car.
- Most policies have a cooling-off period of about 30 days. If the four-day wait wasn't kept, you can cancel for a full refund.
What each add-on is
| Add-on | What it is | Worth knowing |
|---|---|---|
| Paint protection | A coating on the paint, often sold with its own product warranty | It isn't insurance. What it covers, and what you have to do to keep the cover, is in the product's own terms |
| Window tint | Film fitted to the windows | Any installer can fit it later, so it doesn't have to be bought with the car |
| Extended warranty | Repairs after the manufacturer's warranty ends | Optional. It may or may not give you more than your automatic consumer guarantees |
| Gap insurance | Also called motor equity or shortfall insurance. If the car is written off, it pays the lender the gap between what you owe and what your comprehensive insurer pays out | Add-on insurance, so the four-day wait applies |
| Tyre and rim insurance | Covers limited damage to tyres and rims, not wear and tear | Add-on insurance |
| Loan protection (consumer credit insurance) | Covers your repayments if you lose your job, are sick or injured, or die | Other insurance you already hold may cover these events |
| Mechanical breakdown insurance | An insurance version of an extended warranty, starting when the new-car warranty ends | Add-on insurance |
What they cost once they're in the loan
An add-on paid for at the counter costs its price. Added to the loan, it's repaid over the whole term, with interest on top.
Say $2,900 of add-ons go into a 5-year loan at 12.1% with weekly repayments. They add $14.88 to every weekly repayment, and $3,868 by the end of the loan: the $2,900 itself and $968 of interest.
The Quote X-ray counts add-ons in the amount financed. Put in the figures from your own quote to see them in its totals.
Add-on insurance: the four-day wait
Since 5 October 2021, add-on insurance sold with a car can't be sold to you until four days after you buy the car. The wait gives you time to decide whether you need it, and you don't have to buy it at all. Comprehensive car insurance isn't covered by the rule.
- If the wait wasn't kept, you have the right to cancel and get a full refund.
- Cooling-off: most policies have one, usually about 30 days, with a full refund if you cancel within it. After that, cancelling usually gets a partial refund less a fee.
The rule followed years of poor value. ASIC's 2016 review found add-on insurance sold through car dealers paid out 9 cents in claims for every dollar of premium over 2013 to 2015, while dealers earned commissions of 4.2 times the claims paid. For gap insurance it was 6.3 cents, with commissions of 8.2 times the claims. Those figures are from before the 2021 rules. Insurers have since agreed to refund more than $130 million to people sold these products unfairly.
Extended warranties and your automatic rights
A car bought from a licensed dealer comes with consumer guarantees under the Australian Consumer Law. They can't be taken away by anything a business says or does, and no warranty can replace them. The ACCC says an extended warranty "may or may not give any extra rights" beyond the ones you already have, so it's worth reading what it covers before comparing it with its price.
Questions to ask before you say yes
- What does each add-on cost, item by item?
- Is it being added to the loan? If so, how much does it add to each repayment, and over the whole loan?
- Is it insurance? If so, when does the four-day wait start, and how long is the cooling-off period?
- What does it cover that the manufacturer's warranty, your consumer guarantees or your own insurance don't?
- Can it be bought later, or from someone else?
Common questions
Do I have to buy add-ons to get dealer finance?
No. Moneysmart notes you don't have to buy add-on insurance, and the ACCC describes extended warranties as optional. Your consumer guarantees apply either way.
What is gap insurance?
Gap insurance, also called motor equity or shortfall insurance, pays your lender the difference between what you owe and what your comprehensive insurer pays if the car is written off. It's add-on insurance, so it can't be sold with the car until four days after you buy it.
Can I cancel add-on insurance after I've bought it?
Most policies have a cooling-off period, usually about 30 days, with a full refund if you cancel within it. After that you usually get a partial refund less a cancellation fee. If the four-day wait wasn't kept, you can cancel for a full refund.
Is a dealer extended warranty worth it?
That depends on what it covers beyond the manufacturer's warranty and your consumer guarantees, which apply anyway, and on what it costs once it's in the loan. ASIC's 2016 review found mechanical breakdown insurance sold through dealers paid out 22 cents in claims for every dollar of premium.
Sources
- Moneysmart, Add-on insurance (updated 2 October 2026): what each product is, the four-day wait, cooling-off, refunds of more than $130 million.
- ASIC media release 21-189MR: the deferred sales model, from 5 October 2021, with a four-day pause.
- ASIC REP 492, A market that is failing consumers (12 September 2016) and its full report: claims of 9 cents per dollar of premium, by product, and commissions.
- Regulation Tomorrow, Treasury DSM class exemptions exposure draft (July 2026): comprehensive car insurance is among the exempt classes.
- ACCC, New and second-hand cars: consumer guarantees and extended warranties.
- Worked example: standard loan maths, as in the Quote X-ray.
General information only, not financial advice.