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Written byShaun McGowan
With a car loan, the loan is secured against the value of the car that is being financed.
Car loans are best for people who simply want to buy a car, as car loans generally offer much lower interest rates than personal loans.
With secured car loans you should get;
Everyone wants to get the best car loan rates, here is what that will depend on:
Generally the newer the car, the cheaper it will be. See more about what lenders are looking for below.
Currently, a good interest rate for a car loan is below 7% for new and late model cars. The average car loan rates today for people with good credit scores ranges between 5-10%, usually depending on whether it's a new or used car you are purchasing
|Car loan amount||5% interest||7.5% interest||10% interest|
Today, the lowest rate car loan has an advertised variable rate of 3.24% for new cars (+ ex demonstrator cars defined as up to 12 months old with under 5000kms.)
If you're buying an Electric Vehicle (EV) the rate drops slightly to 3.14%
This car loan has a $400 application fee and a comparison rate of 3.78%.
It is also only available to homeowners.
How much you can borrow depends on you and the value of the car, but you could borrow up to $100,000, the average being $30,000.
Usually car loans offered are between two to seven years. The most common is five years. And... most people pay out their loan early so be sure to get a car loan with no fees for early repayment.
Generally, the shortest amount of time you take the car loan for, the lowest amount of interest you will pay.
According to Society One, the most common reason for not continuing to get a loan is due to price shock. Price shock is when you expect to get the advertised rate, but instead due to your credit profile, you get a bigger rate. Money Matchmaker™ doesn't show you advertised rates, only the best real rates you qualify for. So you never get a rate shock.
Most car loan lenders can approve your car loan on the same day you apply. You'll need to be able to supply your ID and proof of your income, eg payslips.
You could expect to be driving your car in 2-3 business days.
The short answer is no. In most cases as long as you can afford to meet the repayments, you can borrow 100% of the cost of the vehicle.
You can apply for a car loan with banks, car dealerships, car finance brokers or online lenders.
They all have different products and rates so it can be hard to find the right one for you.
We recommend using our Money Matchmaker™ to do the leg work for you. It's like applying direct with 11 lenders all at once.
Buying a new car, even if it's not brand new from the dealer, is a big purchase.
There are many ways you can finance your next new car:
The best way to finance a new car is by doing your research. Finding out what you can borrow and how much the repayments will be including all fees. This will ensure you get the best deal and don't pay more than you have to.
A good thing to do, is to write each car loan offer down to do a side-by-side comparison. Always start by asking each lender who has quoted you for the total amount to repay.
This is a really quick way to see what car loan is the lowest cost overall.
Here are 5 things you need to compare when assessing which car loan option is best for you.
Interest is charged by your lender for borrowing the money. It’s essentially how much extra you’ll need to pay back on top of the amount you borrow.
It’s very standard that your repayments will have a fixed interest rate. Variable rates don’t really exist anymore.
This is also called the ‘term’ of your loan. Car loans are usually between two and seven years but most commonly 5 years.
The shorter the term, the less overall interest you will pay.
This is a one-time fee you’ll pay when applying. You may be able to negotiate this or simply choose a lender who doesn't have one!
Try and avoid these where you can - they only add to the amount you have to repay. They’ll be disguised as monthly account keeping fees.
Some secured car loans won’t allow for early repayments. If you plan to repay your loan in full before the end of your term, check to see how much (if anything) you’ll be charged.
Lenders will use these fees to make up for the interest charges they’ll miss out if you repay early.
Money Matchmaker™ can find you the best car loan options from 10 lenders for you to compare online. It's obligation free too.
|Upfront costs||Ongoing Costs|
Dealer delivery charges
Luxury Car Tax
Vehicle Inspection costs
Car History report costs
To qualify for a car loan, you're going to need to have;
A credit score above 699 will ensure you qualify for most loans and can access competitive rates.
Having a bad credit score isn’t the end of the world but it can make securing credit more difficult.
If your application is accepted you may be offered higher interest rates and/or more restrictive loan terms.
If lenders deny your applications you may still be able to access credit with lenders who specialise in bad credit car loans.
Find out what your credit score is for FREE before you apply for a loan.
The lender would prefer to finance new cars over older cars for a couple of reasons, but ultimately are often backed by warranties in case of any mechanical issues. The older the car being financed, the more issues it may have.
Car loan companies love boring, or should we say, consistency!
They love it if you've had the same job forever and have been at the same house since you first left home.
Here's an example of how your employment history and stability can influence your approval.
Just like you shop around for the perfect car, do the same with car finance, to give yourself the best opportunity of getting the cheapest, lowest rate car loan. Plus, you can literally save thousands of dollars in interest and fees.
You’ll also have a better chance of negotiating if you know:
Finance at a car dealership might seem quick and easy but be aware of unnecessary extras that may increase the total loan amount and your repayments.
You really need to do your research and a comparison of offers to find the best car financing option.
Here is a quick check list:
It’s super important to read these so you understand any fees or penalties for your loan.
Look for fees payable at the start and during your loan term, this affects the total amount you pay.
Nowadays, and even more so since Covid, car loan companies operate across the country as the process to getting a car loan can be done via the phone and online.
Most lenders are located in major capital cities like Perth, Sydney, Melbourne, Brisbane, Adelaide and Hobart.
All the lenders we work with all have Australian based teams. So rest assured, when arranging your loan you'll be working with a lender in Australia.
"Hey I’m Money Matchmaker®, I have a team of wizards making me super smart. When you take my quiz, I use your answers to check against all our lenders at once. I’m harmless, I don’t impact your credit score and I'll use the information to help my team of loan experts find you all the loans you're eligible for."
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $30,000 over 5 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.