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A car loan is a secured personal loan used to purchase a car. As the car is used as security, you most likely pay lower interest than other types of car finance.
Lenders offer various interest rates on car loans in Australia depending on the profile of the borrower. The 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.
Car loan terms range from two to seven years and you can borrow up to $100,000 (the average is $30,000). You can apply for a car loan in Australia with banks, car dealerships, car finance brokers or online lenders.
Shopping around for the right loan can save you thousands of dollars in interest and fees.
A car loan is a personal loan specifically used to purchase a car. A car loan uses the vehicle as security (i.e. a secured loan), which allows borrowers to access lower rates because, in the event of non-payment, the lender can repossess the car.
Generally, secured car loans are available for vehicles up to 7 years of age at the time of purchase. Older vehicles often do not provide sufficient security, but may still be financed using an unsecured loan.
To compare car loans in Australia, you’ll want to look at which lenders can offer you car finance based on your financial history, and the factors that could influence both your regular and total repayment amounts.
A comparison rate is a useful tool for comparing car loan offers of the same amount and length.
It expresses the true cost of a personal loan (Interest plus fees) as a simple percentage.
Comparison rates were introduced to make it easier for consumers to accurately compare car loans; before comparison rates, hidden fees and charges could greatly increase the total cost of a loan.
However, it’s still important that you read the terms and conditions of each loan offer to account for any other provisional fees or penalties. Take note of the fees payable, both at the start and during the term of your loan, as this can impact the total amount repaid.
These may include:
You can also compare car loans before visiting a car dealership, so you have a better chance of negotiating and are fully aware of:
When applying for finance directly through a car dealership, it's also important to stay aware of any unnecessary extras which may increase your finance amount and repayments.
The best car loan rates for a consumer will generally be fixed - this means the interest rate applied to your loan will remain exactly the same for the duration of the loan term.
With variable interest rate loans, the interest rate can fluctuate up or down during the term of the loan. This type of interest rate is rarely used when financing a car, as fixed rates are often a little lower than variable rates, and they provide a certainty that makes budgeting and meeting repayments easier.
However, if you plan to pay your loan off early to save on interest, a variable rate will generally not include any extra charges or fees when making additional, early repayments.
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 can help avoid disappointment when trying to get the lowest rate on a car loan, and include:
Traditionally, getting a personalised rate may require exhaustive research and contacting a number of lenders directly, or paying a broker to assist in the process. The base-rate advertisements displayed on many ‘comparison’ sites are only the prime-borrower rate, and offer no indication of your rate, or whether you can get approved.
Money.com.au aims to clear up the confusion around rates and approval, so we can provide the best consumer experience possible. We only show you real, personalised rates from lenders who can give you approval on the loan. No hidden fees, no inflated rates, no stress, and no impact on your credit score.
Just real rates, from real lenders, who you can apply with immediately to get real deals. (Yes, really!)
Here’s an example of the results we show you after you’ve answered a few basic questions:
What is the cheapest car loan? First, answer this: what does ‘the cheapest car loan’ mean to you?
If you want to get cheaper repayments on your loan, you can consider:
If you want to pay a lower amount of interest, you can consider:
If you agree to a car loan that includes early repayment penalties, these can often be charged at a set fee on the number of months you repay early. For example, your early repayment fee might be $10 per month. If you choose to repay the equivalent amount of one year’s repayments early, you will be charged $120.
However, 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 in total interest may often outweigh the early repayment penalties. In the example below, we’ve compared three car loans of $30,000, each with a term of 7 years. The early repayment penalty for each loan is $20 per month repaid early.
|Term||Total interest amount||Repaid after||Early repayment penalty||Interest saved|
|7 years||$9,277.26||2 years||$1,200||$4,840.82|
|7 years||$9,277.26||4 years||$720||$1,812.11|
|7 years||$9,277.26||6 years||$240||$814.56|
The sooner you repay your loan amount, the greater the amount of total interest you could save.
It’s also important to understand that interest rates aren’t the only indicator of a good deal on vehicle finance. 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.
In the table below, you can see how lower interest rates 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.
|Loan amount||Loan term||Interest rate||Fees (monthly)||Monthly repayment|
The best car loan is generally the one that costs the least.
Comparing car loans while keeping rates, fees, and repayments in mind could help you get the best car loan for your personal circumstances.
You can qualify for a car loan in Australia if you are:
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 in advance:
Each car finance lender in Australia offers a different type of application, assessment, and approval process. There are unique requirements and documents needed for the following applications:
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: - 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 You can read more about [private sale car loans here.]()
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 - Confidence to purchase a vehicle, knowing finance will be approved - Security in knowing your application won't be declined (a declined application could affect your credit score)
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.
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 rates - for each year a car is used beyond brand-new status, the rate will increase.
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. 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.