What is a green car loan?
A green car loan is a type of personal loan specifically designed to finance the purchase of environmentally friendly vehicles, such as electric cars, plug-in hybrids or low-emission vehicles. These loans often come with lower interest rates or lower fees as an incentive for EV drivers.
How do green car loans work?
Green car loans function like standard car loans but are limited to eligible vehicles that meet specific eco-friendly criteria, such as a maximum emissions threshold. Borrowers pay the loan in regular installments over a set term, and may benefit from reduced fees or discounted interest rates compared to regular car loans.
Here are some of the main features of a green car loan:
- Usually fixed interest rates but some variable rate options
- Secured and unsecured loan options
- Borrow up to $150,000
- Application and ongoing fees can apply
- Balloon payment option typically available
Pros and cons of green car loans
Pros
- Often come with lower interest rates compared to standard car loans
- Some lenders waive application, monthly or early payout fees
- May include added perks like EV charging credits or discounted roadside assistance
- Many loans allow flexible repayments and redraw options
Cons
- Only available for eligible low-emission or electric vehicles
- Some lenders restrict loans to new or near-new cars only
- Maximum loan amounts may exclude premium EV makes and models
- Not all lenders offer loans for eco-friendly cars
Types of cars you can buy with a green loan
Green car loans can be used to purchase a wide range of low-emission vehicles, typically including pure electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and in some cases, hydrogen or highly fuel-efficient hybrid models.
Eligibility usually depends on the car’s CO₂ emissions – commonly capped at 120g/km or lower.
There are now over 30 car brands in Australia offering green loan-eligible models. Popular EVs include the Tesla Model 3, BYD Atto 3, Hyundai IONIQ 5, Kia EV6, and MG4 Electric. For PHEVs, common options are the Mitsubishi Outlander PHEV, Toyota RAV4 Hybrid, Volvo XC60 Recharge, and Kia Sorento PHEV.
Not all lenders will approve green car loans for older vehicles. Many limit eligibility to new or near-new models, often requiring the car to be less than seven years old, or even brand new at the time of purchase. Demonstrator vehicles may be accepted, but used cars generally need to meet strict age and emissions criteria to qualify.
How to get the best green car loan
Compare discounts and EV perks
Some lenders offer rate discounts, free charging credits, or waived fees for eligible electric vehicles. Look for added value that goes beyond just the interest rate. The comparison rate on the loan is a helpful indicator of whether there’s many fees attached.
Consider smaller lenders
Non-bank lenders, credit unions and mutual banks often provide lower rates and more flexible loan features than the big banks. For instance, RACQ Bank charges no application or ongoing fees, while a similar green car loan from Westpac includes a $250 establishment fee and a $15 monthly account fee.
Factor in the higher price of EVs
Electric vehicles often cost more upfront, which means your loan size might be bigger – even with a discounted rate. Make sure you’re not stretching your budget too thin just to qualify for a green loan or perk.
Ask about funding for charging infrastructure
Some lenders let you borrow a bit extra (e.g. 10%) to cover charging gear like a home fast charger or solar upgrades. This can be useful if you’re going fully electric and want to future-proof your setup.
Shop around
Don’t settle for the first green loan offer. Compare rates, fees and terms across multiple lenders to find the most competitive deal for your circumstances. Use a car loan broker if you need help or are strapped for time.
Green car loan eligibility
To qualify for a green car loan, you’ll need to meet the standard lending requirements as well as specific criteria related to the vehicle you’re buying. Here is what most lenders require:
- You are at least 18 years old
- An Australian citizen or permanent resident
- Currently employed or have a stable source of income (includes self-employed or low doc borrowers)
- Have a good credit score (though there may be options for bad credit borrowers)
- You meet the lender’s criteria on what constitutes a “green vehicle”
How to apply for a green car loan
1. Prepare your documentation
Gather essential documents including proof of ID, income (such as payslips or tax returns), bank statements, and details of any existing debts.
2. Submit your application
Apply online directly to the lender or with the help of a broker. Some lenders offer pre-approval or same-day turnaround if your documentation is complete and you meet their criteria.
3. Provide any additional details
Be ready to supply further information if requested, such as a declaration from your employer or accountant, vehicle details, or other documents. Quick responses help speed up the approval process.
4. Get pre-approval and go car shopping
Once pre-approved, you’ll know your budget and can shop with confidence. Make sure the car you choose meets the green loan eligibility criteria for your lender.
Phil Collard, Money.com.au Asset Finance Expert
“It’s all about striking the right balance – sure, a competitive interest rate matters, but low or no fees can make just as much of a difference. I've seen clients get excited about very low interest rates, only to be brought back down to earth when I explained the high application, monthly or early exit fees. Green car loans are really gaining traction because many lenders are now trimming those extra costs or offering discounted rates to reward eco-friendly choices.”
Phil Collard, Money.com.au Asset Finance Expert
Tips on getting your green car loan approved
To help boost your chances of car loan approval, here are some tips from our asset finance experts at Money.com.au.
Get your finances in order early
Start preparing at least six months before you apply. Pay off outstanding debts, avoid taking on new credit, and build a stable savings pattern. This shows lenders you can manage repayments responsibly.
Check your credit score
Know where you stand before applying. You can check your credit score online for free through providers like Equifax or Experian. A higher score can improve your chances of approval and help you secure a better interest rate.
Save for a deposit
While some green car loans offer 100% financing, having a deposit can reduce your loan amount, lower your repayments, and make your application more attractive to lenders. It’ll also mean you pay less interest over the loan term.
Don’t apply with multiple lenders
Avoid applying with several lenders at once – each credit check can negatively impact your score. Instead, research your options carefully and apply with a lender whose eligibility criteria you clearly meet.
Compare your personalised car loan rates
See what green car loan rates you actually qualify for by comparing multiple lenders at once.
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