Car Loans

Car loan lenders compared

Each type of car finance lender in Australia offers a different type of application, assessment, and approval process. Some offer low fees but slower approval, while others offer higher fees and same-day vehicle finance approval. 

Below, you can compare car loans from banks, car dealerships, and vehicle finance brokers. When selecting a lender, it’s important to consider: 

• The fees and charges 
  
• The likely timeframe in which you will upgrade to your next car 
  
• The loan features you need (such as the capacity for early repayment without penalty)
  

Banks

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.

Car finance obtained from a bank may:

• Be more flexible in relation to 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  
  

Money Tip

Banks may offer a personal loan, not a secured car loan - you may have greater flexibility in how you use the funds, but you will pay a higher rate on this type of finance.

Car dealerships

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. Car loans obtained from a dealership may:

• 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
  

Money Tip

Dealerships are heavily incentivised to sell their in-house finance to their customers, which often represent poor value to borrowers compared to applying with a bank or finance broker.

Vehicle finance brokers

Vehicle finance brokers generally have access to a pool of specialist car finance providers. Using a broker allows you to compare your objectives as a loan applicant against a range of car finance products, which is often the easiest way to find the car loan that suits you best. 

Car loans obtained from a vehicle finance broker may:

• Include guidance on how to submit your application 
• Include specific advice about selecting the right financier 
• Be easier to meet approval criteria of many specialist lenders 
• Ensure required compliance is demonstrated, quickly and efficiently 
  

Money Tip

Most car loans are structured over five years, although most people break this term and upgrade their cars after three years.

Other types of car loan in Australia

In Australia, there are a number of vehicle finance options available as alternatives to a secured car loan. Depending on how you plan to use the vehicle - i.e. for personal or business use - there are three common options worth considering, which are:

Novated Lease

A novated lease is a tax-effective way for an employee to purchase a car, with repayments made from your pre-tax salary - learn more in our Novated Lease Guide.

Chattel Mortgage

A chattel mortgage is a common type of business car finance in Australia, and works in a similar way to a standard car loan. A chattel mortgage can offer significant GST benefits to a business - learn more in our Chattel Mortgage Guide.

Car Lease

A car lease is a type of vehicle finance where a lender will purchase a vehicle and rent it to the borrower over a fixed period. The two types of car finance lease you can consider in this situation are an Operating Lease and a Finance Lease.

Money Tip

We’ve created a detailed guide to help you quickly compare a novated lease vs car loan vs chattel mortgage.

How 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  
  

You’ll need to demonstrate your ability to repay the full loan amount to your lender, and you can streamline your application process by preparing supporting documents:

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

Money Tip

If you cannot provide the documents required for a standard car loan application, you may wish to consider a low doc car loan as an alternative.

How do lenders assess a car loan application?

When assessing your car loan application, lenders will consider:

• The amount of money you wish to borrow 
•  The age and type of vehicle you wish to purchase 
•  Your personal credit history
  

Each lender will have different rates and qualifying criteria, but the ideal candidate for a car loan will:

• Have a clean credit history
• Have been in regular, stable employment for two years
• Be able to provide address history for two years
• Be looking to finance a brand-new or fairly new vehicle
• Be obtaining the car through a dealership or car franchise
• Be able to provide a deposit (though this is not necessary)

Keep in mind this is only the ideal candidate for a car loan. You can still get quick approval if you are:

• Buying a used vehicle
• Purchasing a vehicle through private sale
• Do not wish to provide a deposit
• Have an imperfect credit history

Money Tip

If you are living and working in Australia as a temporary resident - and hold an eligible TSS visa - you can still finance a vehicle with a non-resident car loan.

Credit score for car loans approval criteria

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 
  

If you have a history of defaults or a poor credit score, you can learn more about how to apply for vehicle finance in our Bad Credit Car Loans guide.

Money Tip

Lenders will require more exhaustive documentation when applying for a car loan with a low credit score - it's important to know what you'll need to provide a lender to ensure the fastest approval time.

Car loan borrowing limits

You can generally borrow between $5,000 and $100,000 with 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.

Car loan minimum and maximum borrowing amounts

MINIMUM AMOUNT	MAXIMUM AMOUNT
$5,000	$100,000

Car finance loan terms

Most lenders will offer car loan terms between two and seven years, though the average term is five years. The term on your vehicle finance will often be fixed (i.e. you can’t extend your loan term) however you may be able to refinance a car loan when applying through your certain lenders.

Car loans for used vehicles

Car loans for used vehicles are assessed differently than for brand-new vehicles. 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.

Car loan fees and charges

Most car loans will have various fees attached. If you agree to car finance that includes early repayment penalties, these will often be charged at a set fee on the number of months you repay early. For example, if your early repayment fee is $10 per month and you choose to repay the equivalent amount of one year’s repayments early, you will be charged $120.

Common car loan fees and charges may include:

• 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
  

In the table below, you can see how high fees on a car loan won’t always mean you receive the lowest total repayment amount. Over time, monthly fees can add up to a significant amount over the term of your loan and cost you a lot of money.

To quickly compare loan amounts and see your estimated repayments, use our free car loan calculator.

Money Tip

Before you agree to a car loan, you’ll want to fully understand and assess the impact any monthly fees may have on both your monthly repayments, and total loan repayment amount.

Types of car you can finance with a vehicle loan

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

In general, a vehicle must be no more than 12 years old at the end of the loan term for a borrower to be granted approval for vehicle finance.

Most financiers will not lend on “grey imports”.

Nissan Skylines are often the most common example of this, and a grey import indicates a vehicle has been imported as a used vehicle, and was not originally sold by the manufacturer in Australia.

Vehicles with negative reports on the Personal Property Securities Register (PPSR).

These cars will not be considered for vehicle finance. This may include the vehicle being reported stolen, written off, or registering incorrect odometer readings.

Car finance when buying a vehicle through private sale

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 or written off, and crucially whether the vehicle is still under finance by another borrower.

If you are buying a car through a private sale, you will want to establish that:

• The seller owns the vehicle
• The vehicle’s title is free and transferable
• The seller has the right to market the vehicle
  
• The proceeds of the transaction are going back to the seller
  

To learn more about how to buy a car through a private sale, including how to organise an independent vehicle inspection and obtain a car history report, you can read our guide on Private Sale Car Loans.

Money Tip

Where a vehicle is still under finance from a previous loan agreement, this is referred to as ‘encumbrance’, and will not be approved for a car loan.