Car Loans

If you are over the age of 18, a permanent resident of Australia, can verify that you earn a steady income, and demonstrate an ability to repay your loan amount, you can generally qualify for a car loan. You may also need to earn a minimum of $25,000 per year (to service the loan amount) and hold a valid provisional or full Australian driver licence.

You can generally borrow between $5,000 and $100,000 on a car loan in Australia, though the average amount is around $30,000. The amount you're able to borrow for vehicle finance will be assessed according to your income and credit profile.

Usually not. If you finance a vehicle through a broker or dealership, you may be able to include on-road costs and insurance in your car loan agreement. However, as a car loan is secured only by the vehicle itself, any additional finance beyond the purchase price may incur monthly fees on the loan.

You often won’t need to provide a deposit for a car loan. Most lenders allow you to borrow the entire purchase price of your car as long as you have a good credit rating and can demonstrate financial stability to comfortably meet your repayment obligations.

Most lenders offer car loan terms between two and seven years, though the average term is five years. The term on your car finance will often be fixed (i.e. you can’t extend your loan term). The term of your car loan can also affect your regular payment amount. The longer the loan, the lower the regular repayment amount, but the more total interest you’ll pay over the term.

Used cars are assessed differently than brand-new cars for car loans. You’ll need to factor in the age of the vehicle when you purchase it and the age of the vehicle at the end of the term. Generally, a vehicle will need to be no older than 12 years at the end of the loan term.

A brand-new vehicle purchased from a reputable seller - i.e. not a private sale - will often get you the lowest rates on a car loan.

Most car loans have various fees attached.

Common car loan fees and charges may include:

How vehicle age affects car loan terms

• Establishment fees if your loan is approved and you accept the offer
  

• Ongoing service or account-keeping fees
  

• Penalty fees for early repayment
  

• One-time broker fees if using a vehicle finance broker
  

Yes, you can get a car loan with bad credit. However, you often won’t qualify for standard vehicle finance, and will generally need to apply for a bad credit car loan - these will often have higher rates and you will generally be required to provide extensive supporting documentation to prove your ability to meet repayments.

Your credit score is an important factor for vehicle loan approval. If you have a clean credit file, it should be very easy to get approval for a car loan if you meet basic lender criteria. Negative aspects of your credit file can be broken into three categories, shown below from least to most severe:

• Defaults
  

• Part IX debt agreement
  

• Bankruptcy
  

Any finance application you make will be listed on your credit report - this is why it’s important to evaluate your financial situation and qualifying eligibility before applying for a car loan.

Yes, you can purchase a vehicle through a private sale in Australia. There are some strict guidelines in place for obtaining finance for privately bought cars, and it is the buyer’s responsibility to conduct checks on the vehicle to ensure it meets finance criteria. These checks are performed to ensure the vehicle is not:

• Stolen
  

• Written off
  

• Under an existing finance agreement
  

Yes, you can get a car loan for a private sale advertised on Gumtree or any other online marketplace. The minimum purchase price needs to be $5,000 for a secured car loan.

Different lenders have restrictions as to where a vehicle can be purchased, the age of the vehicle, and the amount they will offer in relation to its value. Important considerations include:

• The vehicle must be no older than 12 - 15 years at the end of the loan term
  

• Most financiers will not lend on used, imported vehicles (e.g. Nissan Skyline)
  

• The vehicle cannot have a negative report on the Personal Property Securities Register (PPSR)
  

You can finance most vehicles with a car loan; newer vehicles and vehicles purchased from a dealership or established car franchise will be easier to approve for a car loan.

Car loan pre-approval is a great way to assess your borrowing eligibility and ability to repay your loan amount before selecting a vehicle. Most lenders will offer pre-approval on a car loan in Australia and, as a borrower, it can offer a number of benefits, including:

• A pre-assessed borrowing limit, which can allow you to refine your vehicle search
  

• Most financiers will not lConfidence to purchase a vehicle, knowing finance will be approvedend on used, imported vehicles (e.g. Nissan Skyline)
  

• Security in knowing your application won't be declined (a declined application could affect your credit score)
  

You can finance most vehicles with a car loan; newer vehicles and vehicles purchased from a dealership or established car franchise will be easier to approve for a car loan.

Approval time will vary from lender to lender, though can be anywhere from a few hours to a few days. You’ll get the fastest approval time if you have a clean credit history, are in stable employment, are wishing to finance a brand-new vehicle and are willing to provide a deposit.

Most lenders will allow you to repay your car loan early; some loans will come with early repayment fees. Depending on how much you repay and how soon into your loan term you may extra repayment, these early repayment fees are often lower than the interest you would save over the full loan term.

Banks are a common source of car finance. Most borrowers have an established relationship with at least one bank - e.g. savings accounts, investments accounts, or a mortgage - and this can help streamline the loan application and approval process.

Bank car loans can:

• Be more flexible with the terms and conditions
  

• Allow you to either repay your loan early without penalties
  

• Allow you to extend your term to reduce your regular repayment amount
  

• Require a longer and more thorough application process
  

Car dealers will generally offer vehicle finance to their customers as part of the sale process. The main benefit to this form of finance is convenience - the dealership allows you to trade-in or dispose of an old car and acquire the finance to purchase a new vehicle in the same transaction.

Dealership car loans can:

• Include higher fees or charges
  

• Have a higher total repayment amount
  

• Have significant commissions attached to the loan
  

• Provide a high level of convenience in not needing to privately sell your old car
  

Vehicle finance brokers have access to a pool of finance providers and allow you to compare your objectives against a range of products. Vehicle finance brokers operate all across Australia - you can find a broker to help you compare car loans in Sydney, Melbourne, Brisbane, Perth, Adelaide, Newcastle, and Canberra.

Vehicle broker car loans can:

• May include upfront brokerage fees or hidden fees and charges
  

• Include guidance on how to submit your application
  

• Be easier to meet approval criteria of many specialist lenders
  

• Ensure required compliance is demonstrated, quickly and efficiently
  

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. 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
  

You can get the lowest interest rates on a car loan by presenting as little risk to a lender as possible. The best car loan interest rates will be applied to secured car loans. 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 available rates.

The lowest interest rates on car finance 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
  

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 car loan rates, and using a broker will allow you to compare offers to try and find the lowest rate.

You can reduce interest charges by making extra payments, or choosing the shortest term you can afford to service. If you accept a long-term loan and are able to repay a significant amount early on in your loan term, the amount you save will often outweigh the early repayment penalties.

In the example below, we’ve compared three car loans of $30,000, each with a term of seven years. The early repayment penalty for each loan is $20 per month repaid early. The sooner you repay your loan amount, the greater the amount of total interest you will save.

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 car loan rates, and using a broker will allow you to compare offers to try and find the lowest rate.

Alternatively, you can choose vehicle finance that allows you to make early repayments, and pay off your loan early to limit the total amount of interest paid on your car loan.

Vehicle depreciation is the value lost on a vehicle as soon as it is driven away. As a car loan is a type of secured personal loan, there will often be a minimum amount you can borrow, which ensures the vehicle you purchase is of adequate value to act as sufficient collateral in the event of any depreciation.