What is the best car loan?
The best car loan is a car loan that meets all your needs for a vehicle, and allows you to consider the total loan amount, repayment schedule, and any benefits you may receive. Comparing car loans, lenders, interest rates and fees will help you to decide which car loan may be best for you.
In this guide, we’ll give you all the information you need to make an informed choice.
Best car loans in Australia
To find the best car loans on offer, you’ll need to know what you’re looking for. Understanding the best types of car loan available - and the different lenders offering them - will allow you to shop around and find the most suitable:
- Secured Car Loans - Car finance where the loan is secured by the vehicle - i.e. used as collateral on the loan. This is the most popular and common car loan in Australia.
- Novated Lease - Often referred to as ‘car salary packaging’. A great option for higher-income earners as it allows you to make repayments and pay for the car’s running costs out of your pre-tax salary.
- Chattel Mortgage - A type of secured car loan where the lender uses the car you're buying as collateral, and provides certain business benefits - a very popular form of business vehicle finance.
- Operating Lease - Similar to a long-term rental arrangement, an operating lease is when you lease a car from a lender for a set period of time without the option to own or purchase the vehicle at the end of the term.
- Commercial Hire Purchase (CHP) - Similar to an operating lease but best explained as a type of ‘rent-to-buy’ finance. A lender will purchase a vehicle on your behalf and allow you to use it while you repay the debt in regular repayments. Once you have repaid the loan amount, you will own the vehicle.
- Finance Lease - Similar to an Operating Lease and CHP, a lender will purchase a vehicle for you, which you will then rent over a set term. At the end of a car lease, you are generally given the option to either return the vehicle to the lender or purchase it to obtain full ownership.
- Bad Credit Car Loan - A type of car loan specifically designed for individuals who are ex-bankrupt or discharged from a Part IX agreement.
Best Car Loans for Personal Use
The best car loans for personal use will be a fixed-term, fixed-rate car loan. This is similar to a secured personal loan, and repayments can often be negotiated to weekly, fortnightly or monthly instalments to suit your income frequency. You’ll get the best deal available if you’re financing a brand-new vehicle obtained through an established seller - i.e. not a private sale - and:
- Have a clean credit score
- Have been in regular employment for two years
- Can provide address history for two years - i.e. rental history or proof of home ownership
- Can provide a deposit
Everything you need to know about secured car loans, including how to apply, compare lenders, and compare rates and terms, can be found in our comprehensive guide explaining how to compare car loan lenders in Australia.
|Interest Rates||From 5.00%|
|Term||2 - 7 years|
|Fees||Low - Medium|
Best Car Loans for Businesses
The best car loans for businesses in Australia will depend on the financial stability of the business, and whether you can benefit from the tax or GST incentives that vary between available loan types. The most common type of business car loan is a Chattel Mortgage, and allows businesses to finance a vehicle and claim back the initial purchase-price GST in their next BAS.
If you plan on financing a vehicle for at least 51% business use, then you’ll want to look at business car finance options.
Everything you need to know about business car loans, including how to compare lenders and interest rates, is in our comprehensive Business Car Loans guide.
|Type of Business Car Loan||Interest Rates||Business Benefit|
|Chattel Mortgage||From 5.49%||GST benefits|
|Operating Lease (Rental Agreement)||From 5.10%||Lease expenses are tax-deductible|
|Commercial Hire Purchase||From 4.49%||Own the car at the end of the term|
|Finance Lease||From 4.49%||Can purchase the vehicle at the end of the lease term|
Best Car Loans for High-Income Earners
A novated lease is similar to a finance lease - but is primarily designed to be of benefit to employees who want to salary package a car and its related operating expenditure.
Owning the vehicle in this way allows the lender to claim the GST (10% goods and services tax) on the purchase of the vehicle as an input tax credit (because the purchase is an operating expense in relation to the lender’s business) and therefore the vehicle can be acquired by you at ex-GST pricing.
If you’d learn more about how a novated lease works, and the benefits available to you, read our Novated Lease guide.
|Interest Rates||From 5.49%|
|Term||1 - 7 years|
|Fees||Low - Medium|
Best Car Loans for People with Bad Credit
The best car loans for people with a bad credit history, ex-bankrupts or individuals discharged from a Part IX are referred to as ‘bad credit car loans’. Also known as second-chance car finance, a bad credit car loan is a secured loan for borrowers with a bad credit rating and will have a higher interest rate than a secured car loan and may also include higher initial or monthly fees.
To learn more about how to apply for second-chance car finance, you can read our Bad Credit Car Loans guide.
|Interest Rates||From 15%|
|Term||3 - 7 years|
|Deposit||May be required|
How can I get the best car loan?
You can get the best car loan by comparing lenders and finding the most suitable loan agreement for your personal circumstances. If you already know how much you want to borrow, you can use our free car loan calculator to quickly compare loan amounts and see estimated repayments.
You can apply for a car loan with:
- Specialist Lenders
- Finance Brokers
- Non-bank lenders
If you're considering buying your car through private sale - i.e. not at a dealership or from a car franchise - you'll need to understand your responsibilities as a buyer. You can learn more about buying privately in our Private Sale Car Loans Guide.
When obtaining finance for private-purchase vehicles, it is the buyer’s responsibility to conduct checks on the vehicle and ensure it meets finance criteria.
The best car loans in Australia don’t always have the lowest car loan interest rates. We have a dedicated guide to show you how car loan interest rates work and how to get the cheapest car loans available.
In summary, the best car loans in Australia:
- Meet your needs for a vehicle
- Are often different for consumers and businesses
- Can offer specific benefits to certain borrowers
- Are offered by a variety of lenders
- Allow you to compare interest rates and fees before making a decision
- Are found by using a comparison rate instead of an advertised rate
Best Car Loans FAQ
What are the best car loans?
The best car loans for personal use will be a fixed-term, fixed-rate car loan, with interest rates starting from 5.00% and with a term between 2 - 7 years. The best car loan for you personally will depend entirely on your financial situation and how you plan to use the vehicle.
What are the best car loans for businesses?
The best car loans for businesses will offer tax or GST benefits. The most common business car finance is a Chattel Mortgage, and offers full ownership of the vehicle with rates from 5.49%. The best car loan for your business will depend on how you choose to use the vehicle, what level of ownership you require from the car, and the business benefits you receive.
Can I get car finance as part of my salary package?
Yes, if your employer is willing to agree to a novated lease as a vehicle finance option. A novated lease allows an individual to salary package a car and its related operating expenditure, with interest rates from 5.49% and terms between 1 - 7 years.
What is the best car loan for bad credit?
The best car loans for individuals with bad credit are called second-chance car finance or bad credit car loans. Bad credit car loans will generally have higher interest rates and fees than other forms of vehicle finance, with interest rates from 15.00% and terms between 3 - 7 years.