# Comparison rate — why the headline rate never tells the whole story > A comparison rate folds the interest rate and standard fees into one number so NZ tradies can size up finance offers more like-for-like than the headline rate. Source: https://tradiefinance.co.nz/glossary/comparison-rate Published: 2026-05-15T08:00:00.000Z Category: business-finance Tags: glossary, business-finance Image: https://tradiefinance.co.nz/images/resources/generated/tradie/glossary/comparison-rate-primary.jpg Image alt: A tradie reviewing finance options for Comparison rate — why the headline rate never tells the whole story --- The big number on the ad is the one they want you to look at. The comparison rate is the one that tells you what you're actually paying. Knowing the difference can save a tradie real money — and we see it trip people up every week. ## What it is A **comparison rate** is a single rate that bundles the interest rate together with the standard fees on a loan — things like the establishment fee and ongoing account fees — into one figure. The idea is simple: two offers can show the same headline interest rate but cost very different amounts once the fees are in. The comparison rate drags those fees into the open so you can line offers up more like-for-like. The headline (or "advertised") rate is just the interest charged on the money you borrow. It says nothing about the $400 establishment fee or the monthly account fee bolted on top. A lender can run a sharp-looking headline rate and quietly make it back on fees. That's exactly why the headline rate on its own misleads — it's a marketing number, not the real cost. ## How it works and why it matters for tradies A comparison rate is worked out on a set example loan — a standard amount over a standard term — so two offers get run through the same maths. Once the fees are folded in, they turn into a few extra percentage points: same headline rate, different total, and that gap is the fees doing their work. One thing worth knowing in NZ — unlike Australia, we don't have a single legally mandated comparison-rate format here, so not every lender quotes one the same way (or at all). What lenders here must disclose under the CCCFA is the total cost of credit on your actual loan, which is the number that really counts anyway. Say you're a sparkie financing a $40,000 van over 4 years and two lenders both quote a 9.5% headline rate: | | Lender A | Lender B | |---|---|---| | Headline rate | 9.5% | 9.5% | | Establishment fee | $250 | $750 | | Monthly account fee | $0 | $12 | | Comparison rate (illustrative) | ~9.8% | ~11.1% | Identical headline rate, but Lender B costs noticeably more once the fees load in. The comparison rate is what drags that into the open — and it's why a 'cheap' rate isn't always the cheap deal. (Figures are illustrative only.) Treat the comparison rate as a fairer first sort of the offers in front of you. Then check the full total cost of credit before you commit — that's the actual dollars, not a rate. Two things the comparison rate **cannot** do for a tradie. First, it's built on a standard example loan, so it won't reflect your exact loan size, your term, or your deposit. Second — and this is the big one for asset finance — it doesn't account for structure. If your deal has a [balloon payment](/glossary/balloon-payment) at the end, the comparison rate won't capture what that balloon does to your total cost, because the standard example doesn't include one. Same with early-repayment fees or break costs. So treat the comparison rate as a handy filter, not the final word. The number that actually matters is the [total cost of credit](/glossary/total-cost-of-credit) on your specific deal — every dollar of interest and fees over the life of the loan. As a broker we place your application across a panel of lenders, so we can line those total-cost numbers up side by side for you rather than leaving you to decode each lender's fine print. ## See also - [Total cost of credit](/glossary/total-cost-of-credit) - [Balloon payment](/glossary/balloon-payment) - [The real cost of a cheap finance rate](/blog/the-real-cost-of-a-cheap-finance-rate) Not sure which offer is actually the cheaper one? [Book a call](/book-a-call) and we'll run the real numbers together — no pressure, just plain answers.