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Car loans for pensioners

How to get a car loan when you’re on a pension.

It can be hard to get big ticket essentials like a car if you’re on a pension, especially because you might not have as many car loan options as other people.

The good news is there are still many choices if you know where to look, and there are also some ways to find a cheaper car loan.

This guide walks through the steps that can help pensioners drive away in the right car, and with the right car loan.

Can I get a car loan if I am retired or on a pension?

Yes. You don’t have to be working to get a car loan, as long as you still have some kind of income, such as Centrelink payments, a disability pension, age pension, or another kind of pension.

However, your range of options will still be more limited than someone who is still in full time employment. To save time and avoid application fees, you’ll want to make each enquiry count.
There are two possible ways to start:

  • Find out how much you can borrow, and then find a car to match. If you want to know how much you can borrow and then pick out a car based on that amount, you can get pre-approved for a car loan. If this sounds like your style, find out how to get pre-approved car loans here.
  • Decide what kind of car you want, then find a loan to match. This will often help you save money overall, because you might end up borrowing less, having lower repayments and finding a more competitive offer. Read on if you’re interested in doing it this way.

How do car loans work if you’re on Centrelink?

Generally, you’ll need to demonstrate that you’ll be able to keep up with repayments. A lender will look at how much you earn from pensions, other Centrelink payments and other income, and then compare it to the repayment amounts.

This means your application is generally much more likely to be accepted when you’re borrowing smaller amounts. It might be a good idea to look at buying a used car rather than a new one, and putting savings towards the cost of the car so you only have to borrow the difference.

If it turns out that you only need to borrow a smaller amount after this, such as under $5,000, you may want to consider a short term Centrelink personal loan, rather than a car loan.

This is because:

  • Car loans usually have higher minimums. Depending on the provider, you might not be able to borrow small amounts less than $5,000 or $10,000 for a car loan. This might lead to borrowing more than you need.
  • Car loans are usually secured. This means that if you can’t keep up with repayments, the car might be repossessed, leaving you out of pocket and without a car. You can also find unsecured car loans, although they might have stricter requirements. Unsecured loans might be safer if you’re not sure you’ll be able to make all the repayments.
  • Car loans can be harder to get: Car loans will often have stricter eligibility requirements, and criteria you need to meet, than personal loans.

What criteria will I need to meet to get a pensioner car loan?

Applications are often done on a case by case basis. Generally, you’ll have to convince the lender that you can keep up with repayments.

This mostly involves looking at the difference between your incoming payments and outgoing expenses, and seeing if your budget also has enough room to accommodate the car payments.

Some lenders will also have specific requirements in addition to this.

LenderLoan typesCriteria
ANZUnsecured Personal LoanMinimum income $15,000 p.a., Australian citizen, permanent resident or have a valid visa.If you're retired but have income from other sources; need proof of income.
Bank of MelbourneUnsecured Personal LoanAge pension is not accepted as income.Car cannot be used as security for the loan.
BankSAUnsecured Personal LoanAge pension is not accepted as income.Car cannot be used as security for the loan.
CashfirstSecured Personal LoanMinimum income $20,000 p.a.Australian resident.
CUAFixed Rate Car LoanEarning a regular income.Australian citizen or permanent resident.Maximum age of the car at the end of the term is 12 years.
Latitude Financial ServicesPersonal Loan (Secured)Earning a regular income.Australian citizen or permanent resident.Maximum age of the car at the end of the term is 12 years.
NABNAB Car Loan (Variable Rate)Earning a regular income.Residing in Australia.Australian citizen, permanent resident, New Zealand citizen or possessing a 457 visa

Be able to afford the loan repayments.

Car cannot be used as security for the loan (unsecured).

RACQNew Car LoanUsed Car LoanAustralian citizen, permanent resident or on an approved working visa.Able to afford the loan repayments.Financing a new or used car.
NRMACar LoanApplications handled on a case-by-case basis.

What should I look for in pensioner car loans?

A car loan can be with you for a long time, often over 5 years, so it’s worth making a careful choice, and considering the costs.

  • Secured or unsecured? You might be able to find better rates with a secured loan, but an unsecured loan might be less hazardous if your circumstances change and you fall behind on payments. Unsecured loans are generally harder to get.
  • Fixed or variable rates? Fixed rates will stay more consistent and predictable over time, while variable rates might go up. In favourable conditions, however, variable rates can also go down. If you’re on a pension, it’s possible that a fixed rate loan might be better for your needs than a variable rate loan.
  • What are the interest rates? A lower rate might generally be better, but make sure you weigh the fees and other loan terms in calculating the true cost.
  • What are the fees and charges? If you’re not sure you’re eligible for a loan, you might want to watch out for high application fees. Generally the fewer and lower the fees the better, but you might find a loan that offers more value for money in the long run, at the cost of higher initial fees.
  • What are the loan amounts? What are the minimum and maximum amounts you can borrow with different loans?
  • How long is the loan period? How long will you be making repayments? Longer repayment periods often mean paying more overall, but paying smaller amounts each time.

When you apply for a loan, a provider might suggest loan terms that could work for you. For example, a car loan for pensioners might be more likely to come with a longer repayment period, and as a secured rather than an unsecured loan.

How to apply for a pensioner car loan

It’s important to make sure sure you fully understand all the terms, conditions and obligations before signing up for a loan.

You can compare some car loans above, and see some of the key features of each. You can also select different loan amounts and repayment periods to see how much you’ll be paying back each month.

This can help you work out whether you’re going to be able to keep up with repayments, and whether your application might be accepted by different providers. It can also help you put the interest rates in more concrete terms and work out how much you’ll be repaying per month.

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