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Car Loan Interest Rates


What are the best car loan interest rates?


The best car loan interest rates will be applied to secured car loans. There are many types of secured car loan that you can learn about in this guide, but all of them will use the vehicle you purchase as collateral over the loan. Collateral on a loan reduces the level of risk presented to a lender when approving your application for finance.


Secured car loans include various levels of vehicle ownership - some will grant full ownership over the vehicle immediately, while others will involve you renting the vehicle from a lender without owning the vehicle.


Lowest car loan interest rates in Australia

Type of Car Loan Example Interest Rates
Secured Car Loan From 5.00%
Private Sale Car Loan From 6.59%
Chattel Mortgage From 5.49%
Commercial Hire Purchase From 4.49%
Finance Lease From 4.49%
Operating Lease (Rental Agreement) From 5.10%
Bad Credit Car Loan From 15.00%

IMPORTANT: These are example interest rates for car loans in Australia and are not indicative of the current interest rates available. Car loan interest rates will vary and change from time to time, and for accurate, up-to-date car loan interest rates you will need to speak to your broker or lender directly.


MONEY TIP

Are you an employee wanting to salary package a vehicle for work? Read everything you need to know about this type of vehicle finance in our Novated Lease guide.


Best fixed-interest car loans


The best car loan interest rates for a consumer will be fixed - this means the interest rate applied to your loan will remain exactly the same for the duration of the loan term. Fixed-rate interest car loans which provide immediate full ownership of the vehicle will begin at 5.00%. With these loans you generally cannot make additional repayments or repay the loan earlier than initially agreed.


A brand-new vehicle purchased from a franchise or dealership - i.e. not private sale - will often get you the lowest interest rates on a car loan. In the example below, you can see how three vehicles purchased from a dealership or franchise may affect interest rates.


Brand-New Car Loan Interest Rates vs Used Car Loan Interest Rates

Brand-New 2 years old 5 years old
5.00% 6.99% 11.99%

Important: This is an example and actual rates will vary.


A brand-new vehicle purchased from a franchise or dealership - i.e. not private sale - will often get you the lowest interest rates on a car loan. In the example below, you can see how three vehicles purchased from a dealership or franchise may affect car loan interest rates.


0% car loans - too good to be true?


A car loan with a 0% annual percentage rate (APR) enables you to purchase a car at an agreed price, and make monthly payments on the principal loan amount without paying interest. Sound too good to be true? There are important factors to consider on a 0% car loan, including:

  • 0% interest may only be applied to part of the loan term
  • You will need an extremely good credit rating to apply
  • You will often be unable to negotiate the sale price of the vehicle
  • 0% may only be offered on some cars - often vehicles a dealership is desperate to sell
  • If you are trading in a vehicle, you may be offered a lower trade-in price
  • You may have to agree to a short term with high monthly repayments

Dealerships will offer 0% car loans for two main reasons:

  • To clear inventory - a dealership may have had the vehicles on the car lot for a considerable amount of time and is desperate to get rid of them. In this case, they may offer 0% interest to ensure they can clear the remaining stock and purchase new vehicles. The dealership may only may a small profit on the sale, but it will still benefit them to sell the vehicle off.
  • To draw in potential buyers - a dealership will know that advertising a 0% car loan will attract customers. However, if they customer doesn’t qualify for a 0% car loan with the dealership, they are already in the mindset of purchasing a car and could be sold on a different vehicle under a standard car loan agreement
MONEY TIP

Fixed-rate interest is a guarantee by the lender that the interest rate on your loan will not change throughout the loan term.


How can I get the lowest interest rates on a car loan?


You can get the lowest interest rates on a car loan by presenting as little risk to a lender as possible. Interest rates are directly tied to your risk level - the lower the risk of failing to meet your repayment obligations throughout the term, the lower the interest rates available.


The lowest interest rates on a car loan are offered to borrowers who fit the profile below:

  • Clean credit history
  • Regular, stable employment for two years
  • Living at the same address for two years
  • Financing a brand-new vehicle
  • Obtaining the car through a dealership or car franchise
  • Able to provide a deposit

How lenders decide if you qualify for the lowest car loan rates


When lenders assess an application for a car loan, they’ll decide if you qualify for approval and assign an interest rate based on a number of factors. Understanding these will help avoid disappointment when trying to get the lowest interest rate on a car loan, and will include:

  • The age of the vehicle - best rates will be for brand-new vehicles
  • The type of vehicle - lowest rates will be for vehicles under 4.5 tonne
  • The amount you wish to borrow - best rates will be for an amount you can easily repay
  • The length of your loan - lowest rates will be for the shortest term
  • Your credit history - best rates will be for perfect credit scores
  • Your net income - lowest rates will be for stable, high-income applications
  • If you own a property - best rates will be for homeowners
MONEY TIP

Financing a brand-new vehicle and having a perfect credit score are two key factors to getting a low interest rate on a car loan.


What you need to apply


You can apply for a car loan in Australia if you are:

  • Over the age of 18; and
  • An Australian Citizen or Permanent Resident; and
  • Are employed or have a regular source of income

To streamline the application process and get faster approval on a car loan, you’ll need to provide supporting documents that illustrate your ability to comfortably service the loan amount, and prove your identity and income status:

  • Proof of identity - i.e. passport or driver's licence
  • Proof of income - i.e. payslips
  • Proof of your assets - i.e. property title
  • Details of any current debts and expenditure

MONEY TIP

Having all the required documentation prepared before submitting an application for vehicle finance will ensure the fastest processing and approval speed on a car loan.


How to apply


In Australia, you can apply for a car loan with:

  • Dealerships
  • Banks
  • Finance Brokers
  • Specialist Lenders
  • Non-bank lenders

Applying direct at a dealership will be the most convenient option if you are purchasing a car with them, as you can browse, select, and purchase a car at the same time you apply for finance although you may not get yourself the best deal.


Finance brokers will allow you to compare various lenders and provide you with a good selection of options to choose from, and may charge a one-time broker fee for their services. They’ll essentially run the entire process for you and make it very easy.


Specialist lenders will often provide a simple online application process and competitive rates, though if you are searching for the lowest interest rates and loan repayments, you’ll need to research non-bank lenders - such as credit unions - and apply direct.


Your own bank will be able to offer you finance to purchase a car, but it is most likely they will offer you a personal loan, this typically comes at a higher interest rate than the secured car loan.

Seen advertised car loans and want to compare your repayment amount or total interest? Our free car loan calculator is a quick and easy tool you can use to estimate your loan costs.


MONEY TIP

A personal loan is not the same as a secured car loan. Make sure you understand the difference before agreeing to a loan offered by your bank.


How to compare car loan interest rates


Car loan interest rates are important, because the lowest car loan interest rates won’t always mean you get the best car loan available. In Australia, you’ll find two types of interest rates:

  • The advertised rate
  • The comparison rate

The advertised rate is determined only by the interest rate applied to the loan. The comparison rate is a more realistic assessment of the loan cost - it combines the advertised rate and all fees, such as establishment fees and ongoing monthly fees.

The lowest rate does not always mean the best car loan!

Car Loan Example 1 Car Loan Example 2
Car Loan Amount $30,000 $30,000
Advertised Interest Rate 6.00% 7.20%
Application Fees $250 $0
Monthly Fees $20 $0
Term (Length) 5 years 5 years
Monthly Repayment Amount $599.98 $596.87
Comparison Rate 7.71% 7.20%
Total Amount to Repay $36,248.80 $35,812.20

As you can guess, you’ll see the advertised rate far more often when searching for car loans. This is because a comparison rate will be much higher if there are significant fees attached to the loan - which makes them unappealing to borrowers wanting the best deal.


  • The best car loan will be the one most suitable for your personal circumstances - you can learn more about which types may be most suitable in our guide on the best car loans in Australia.
  • The cheapest car loans will also vary, depending on whether you wish to pay the smallest amount of interest over the term or want the lowest monthly repayments - we’ve created a dedicated explanation guide to help our readers understand more about cheap car loans in Australia.
MONEY TIP

Some car loans can be structured to allow early repayments without penalty. This can be a good option if you need initial lower repayments but plan to repay the loan in full before the end of your term.


Car Loan Interest Rates Summary


Lenders will offer various interest rates to car loans in Australia depending on the profile of the borrower. The interest rate applied to your loan will depend on your credit history, employment history, the age of the vehicle and the type of lender you apply with.


In summary, car loan interest rates in Australia:

  • Are lower for brand-new vehicles
  • Are lower for shorter term loans
  • Are lower if you have a perfect credit score
  • Are higher for private-sale vehicle purchases
  • Can be as low as 4.49% for some business car loans
  • Can be as low as 5.00% for personal car loans

Car Loan Interest Rates FAQ


What is the lowest interest rate on a car loan in Australia?


The lowest interest rate on car loans in Australia vary depending on the type of vehicle finance you wish to apply for:

  • Secured Car Loan - From 5.00%
  • Private Sale Car Loan - From 6.59%
  • Chattel Mortgage - From 5.49%
  • Commercial Hire Purchase - From 4.49%
  • Finance Lease - From 4.49%
  • Operating Lease (Rental Agreement) - From 5.10%
  • Bad Credit Car Loan - From 15.00%

Will bad credit affect car loan interest rates?


Yes. If you have bad credit, you can expect higher interest rates for your vehicle finance. However, you can still get a car loan if you have bad credit, which will generally be offered by lenders as a product called a Bad Credit Car Loan, or second-chance car finance.


Where can I find the lowest car loan interest rates?


The lowest car loan rates will be offered by non-bank lenders and will require you to apply directly. Banks may also offer low interest rates on vehicle finance, and using a broker will allow you to compare interest rates on car loans to try and find the lowest interest rate.


Does the type of vehicle affect car loan interest rates?


Yes. The vehicle you wish to finance will influence the interest rate applied to your loan. A brand-new vehicle will generally get you the lowest interest rates - for each year a car is used beyond brand-new status, the interest rate will increase.