buying a car

Guide to taking out a car loan

Looking for an easy way to get behind the wheel of a new car? Try financing a vehicle through a car loan.

You’ve found a car that you love. The colour is perfect, the size is just right, and it drives like a dream; but the price tag is a problem. Car financing provides a way for you to purchase your favourite vehicle without emptying out your bank account. You can buy a car and pay it off while you drive, instead of waiting until you've saved enough cash.

In order to navigate the world of car financing there are some factors you need to consider.

IMB New Car Loan

IMB New Car Loan

from

5.99 % p.a.

fixed rate

from

6.34 % p.a.

comparison rate

  • No monthly fees
  • No early repayment fees
  • Borrow up to $75,000
Security Logo

100% confidential application

IMB New Car Loan

Apply for IMB New Car Loan and enjoy a great low fixed interest rate with no ongoing fees.

  • Interest rate from: 5.99% p.a.
  • Comparison rate: 6.34% p.a.
  • Interest rate type: Fixed
  • Application fee: $250
  • Minimum loan amount: $2,000
  • Maximum loan amount: $75,000
Go to site

Car loan comparison

Rates last updated November 24th, 2017
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Monthly Service Fee Application Fee Monthly Repayment Product Description
IMB New Car Loan
From 5.99% (fixed)
6.34%
$2,000
1 to 7 years
$0
$250
Borrow up to $75,000 for a new car up to two years old. Competitive 5.99% p.a. rate available to all approved applicants.
RACV New Car Loans
From 6.49% (fixed)
7.03%
$15,000
1 to 7 years
$0
$380
Enjoy this fixed rate new car loan offer from RACV. No ongoing fees.
Beyond Bank Low Rate Car Loan
From 5.69% (fixed)
5.97%
$25,000
1 to 7 years
$0
$175
A great rate for cars under 2 years old.
Stratton Finance New Car Loan
From 5.49% (fixed)
6.62%
$18,000
1 to 7 years
$7
$499
Benefit from a car broker with over 25 years experience
Bank Australia Car Loan
From 6.45% (fixed)
6.66%
$1,000
7 years
$0
$150
A competitive rate and the ability to offset your car’s carbon emissions for the loan term.
bcu Car Loan
From 5.9% (variable)
6.82%
$5,000
1 to 5 years
$8
$250
Borrow up to $65,000 for a car up to 5 years old. The New Car Loan from bcu allows you to make extra repayments and access a redraw feature
Latitude Personal Loan (Secured)
From 12.99% (fixed)
14.2%
$3,000
2 to 7 years
$13
$250 (Loans under $4000 - $140)
Can be used for whatever purpose: renovating, buying a car, booking a holiday. Funds can be in your account in as little as 24 hours.
Freedom Finance Car Loan
From 5.1% (fixed)
5.94%
$35,000
1 to 5 years
$0
$380
If you meet all the requirements you could get access to a range of lenders to finance a new or used car up to 4 years.
AutoCarLoans
From 5.16% (fixed)
6.64%
$15,000
1 to 7 years
$5
$381.80
AutoCarLoans can match you with a lender from its panel with rates starting from 5.16% p.a. Suitable for vehicles up to 2 years old.
IMB Secured Personal Loan
From 7.39% (fixed)
7.74%
$2,000
1 to 5 years
$0
$250
All approved applicants can access this competitive rate and use the loan to finance a range of purposes. Loan amounts up to $60,000 available.
RACV Personal Loan
From 7.49% (fixed)
8.04%
$5,000
1 to 7 years
$0
$380
You could use this personal loan offer from RACV to help finance a renovation, holiday or project.
bcu Secured Freedom Loan
From 9.08% (variable)
9.99%
$4,000
1 to 5 years
$8
$250
A competitive, secured personal loan that you can use for a variety of purposes.
NRMA New Car Loan
From 5.99% (fixed)
6.53%
$15,000
1 to 7 years
$0
$380
Purchase a new car with an NRMA Car Loan with a fixed rate term and no monthly fees. NRMA Members could save 1% on loan rates.
St.George Secured Personal Loan - Fixed Rate
From 8.49% (fixed)
9.6%
$3,000
1 to 5 years
$12
$195
Get behind the wheel of your perfect car with a competitive interest rate from St.George. Get an application response within 60 seconds.
Bank of Melbourne Secured Personal Loan
From 8.49% (fixed)
9.6%
$3,000
1 to 5 years
$12
$195
A low rate personal loan from Bank of Melbourne with variable or fixed option.
Westpac Car Loan
From 8.49% (fixed)
9.67%
$10,000
1 to 7 years
$12
$0 (On new loan applications before 31st January 2018.)
Apply for a Westpac car loan and enjoy a great interest rate when you purchase a new or used vehicle.

Compare up to 4 providers

How does car financing work?

As with personal loans, car finance is provided by a lender. When you find a loan that suits your personal needs and matches your financial situation, you can use it to purchase your vehicle of choice.

Once you secure the finance you’ll be subject to interest rates, and will have to repay the loan based on the terms set out in your agreement. These terms are set by the lender and may include additional fees and stipulations, as well as built-in penalties for failing to make payments. Make sure you take the time to compare finance options from different lenders so you get the best deal on offer.

Types of car finance loans

There are various types of car loans, offering different options and terms. Look at all the options available and decide which one is right for your personal situation.

  • Secured loans. With this type of finance, the lender uses your car as collateral in case you can no longer repay the loan. Secured loans tend to have lower interest rates since there is less of a risk to the lender.
  • Unsecured loans. The opposite of a secured loan, an unsecured loan is one without any collateral. They usually attract higher interest rates and fees, as the lender has more to lose and no protection against default.
  • Dealership finance. This is a car loan arranged through a car dealership. Dealerships usually have their own agreement with a financial institution, which includes set terms that they use to offer finance options to buyers. The loan is paid directly to the dealer and its finance company.
  • Chattel mortgage. This option can be used to purchase a car or commercial vehicle for a business. The lender holds a mortgage over the vehicle in order to secure the loan.
  • Novated lease. An agreement is made between yourself, your employer and the lender. Your employer takes the repayments from your pay cheque and pays them to the lender. Keep in mind that this option isn’t offered by all employers.
  • Fixed and variable rate car loans. If you take out a loan with a fixed interest rate, the interest stays the same throughout the term of the loan. You will miss out if the rates fall, but you will always know how much your repayments are going to be. It's harder to budget if you have a variable rate as they can change with market fluctuations. You benefit if rates go down, but your repayments increase if rates rise.

How to compare your car financing options

All loans are not created equal, and some may have stipulations that can hurt you in the long run. With any type of finance you should shop around for the best deal, and compare options to find one that fits your individual circumstances. Here are a few things to consider:

  • Fees. Loans can have additional fees attached to them that you’ll have to pay. Compare such things as application fees, annual fees and other additional charges, and choose the loan that is the most competitive.
  • Repayment options. Some loans may include the option of paying in instalments that line up with when you are paid, whether that is weekly, fortnightly or monthly. Others might allow you to make additional payments to pay off the loan faster. Consider the repayment options on different loans to find one that best suits your circumstances.
  • Rates. Interest rates can vary depending on the lender. Look at different lenders to see which is offering the best deal, and decide if you’d rather pay a variable or a fixed rate.
  • Loan terms and amount. Some loans have a minimum amount, which may be higher than the actual amount you need. Be sure to choose the loan amount that best fits your needs. You should also compare the length of the term, as some loans can be for as little as one year while others can stretch up to seven years.
  • Flexibility. You might need a loan that offers some flexibility when it comes to repayments. Some may allow you to pay more than the designated instalment amount, so you can pay off the debt faster. Others may offer discounts for bundled package, such as a car loan and personal loan combined.
  • Restrictions. A car loan can come with restrictions that don't meet your needs. Some lenders may only allow the borrowed money to be used towards the purchase of a vehicle. Others may dictate that you pay designated amounts at set intervals. Compare restrictions between loans and find your best fit.

What you should watch out for

There are pros and cons when it comes to car financing. However, if you take the time to compare different loans, and do your research on restrictions and fees before making a choice, the process will run more smoothly.

You should make sure you can comfortably manage the loan financially. You don’t want to end up defaulting on the loan because you can’t repay it. Failure to repay can be an even bigger problem if you chose a secured loan, since the lender has the right to repossess the vehicle and sell it to repay their loss.

How to apply for car finance

Once you’ve compared all the options from our comparison table and decided on the best loan for your financial situation, you can apply simply by hitting "go to site". Each institution has its own policies and qualifying rules, but there are some general principles that most lenders follow.

  • When you apply you need to have proof of your identity on hand. This includes personal details such as your full name and date of birth.
  • You also need to present financial information that includes your income and credit history, including details of any debts, liabilities or obligations.
  • You need information regarding the car you intend to buy, including the make, model and value, especially for a secured loan.

Working out car financing may seem a little overwhelming at first, but if you take one step at a time and do the research, you'll have a clear understanding of the best option for your needs. Once your finance is set up, you can finally get behind the wheel of your new vehicle, and still have money left in the bank.

Picture: Shutterstock

Was this content helpful to you? No  Yes

Related Posts

IMB New Car Loan

Borrow up to $75,000 for a new car up to two years old. Competitive 5.99% p.a. rate available to all approved applicants.

Beyond Bank Low Rate Car Loan "Special Offer"

A great rate for cars under 2 years old.

RACV New Car Loans

Enjoy this fixed rate new car loan offer from RACV. No ongoing fees.

Latitude Personal Loan (Secured)

Can be used for whatever purpose: renovating, buying a car, booking a holiday. Funds can be in your account in as little as 24 hours.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.
Ask a question