“The transition needs to happen quickly:” The Australian bank financing only EVs

Bank Australia sees an opportunity to grow its currently small vehicle lending division with the radical-in-Australia shift towards electric car loans in February. 

The mutual bank introduced a ban, telegraphed in 2022, on lending for new petrol, diesel and hybrid cars on 20 February.

“Bank Australia is a smaller lender and car lending is a much smaller portfolio than our home loan portfolio, so we do see a much larger growth opportunity from a small base,” says Bank Australia’s head of impact Jane Kern. 

“We are really hoping to carve out a market in future in lending to electric vehicles.” Kern says there has been a small uptick in electric vehicle (EV) car loans since February.

Bank Australia is the only bank in the country to completely remove the option of car loans for new ICE vehicles. 

It’s lending at 6.95 per cent interest for new and used EVs, but is still offering loans at a higher interest rate of 8.95 per cent for second hand and demonstration internal combustion (ICE) vehicles.

The bank says this allows Australians to still access a wide range of vehicles but doesn’t contribute to new ICE cars on the road. 

“We know that not everyone can afford an electric car at the moment,” Kern told The Driven. 

“We chose 2025 because we knew the transition needed to happen quickly and there was an expectation that a large range of affordable vehicles would be coming on to the market in 2025.” 

The years-long expectation that 2025 would be the year of the cheaper EV is being born out, as manufacturers slash prices to gain market share around the world. 

In Australia, AusEV debuted utes that are cheaper than the beloved Hilux, Hyundai launched its cheapest town runabout yet, newcomer Zeekr unveiled an entry level wagon for $44,000, and giant Chinese carmaker Nio released a hatchback with a swappable battery where the top spec variety is priced at just $27,000 – and this is just in April. 

A message that EVs are viable

Whether the bank will stick with ICE lending at all will depend on the development of a mature secondhand market for EVs, Kern says.

But the shift away from funding new ICE vehicle purchases is “a step in the right direction” to reduce emissions and encourage climate action, she says. 

“We also want to send a message to the rest of Australia about the rapid rise of electric vehicles.”

Bank Australia has a strategy to achieve net zero by 2035.

Stick to knitting or live the values?

Bank Australia’s two year warning that it would quit ICE didn’t stop a wave of fear and loathing when the end came. 

In February, message boards on Reddit and Facebook lit up with comments of the ilk that banks should “stick to financial services instead of playing politics”, before more measured heads leaned in. 

On the Reddit thread r/CarsAustralia users were broadly supportive of the bank’s move. 

“This is a product offered by a boutique bank. I have no objection to them catering to their niche clientele,” said one user.

“Good for them – being ethical and shit is all part of their branding so at least they’re putting their money where their mouth is. Bendigo Bank has better EV loan rates though and their website still lets you apply for a normal car loan,” another user replied.

Kern says the policy has been broadly supported by the bank’s customers, who also own the mutual.