car loans for pensioners

Car loans for pensioners

How to get a car loan if you're retired or receive 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 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 income from investments or other assets, 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 loan 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 retired or receiving 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 $3,000, you may want to consider a short term 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 $3,000 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.

What criteria will I need to meet if I'm retired or on a pension?

Applications are often done on a case by case basis. Generally, you’ll have to be able to prove to 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.

LenderEligibility criteriaReview the loan
AutoCarLoans
  • Be over the age of 18
  • Have a good credit history
  • Be buying a new car or one less than 2 years old
  • Want to borrow more than $15,000
Review
Bank Australia
  • Be over the age of 18
  • Be an Australian citizen or permanent resident
  • Have a regular income
  • Have no history of bankruptcy
Review
BankSA
  • Be over the age of 18
  • Be an Australian citizen or permanent resident
  • The car you're buying will be less than 12 years old when the loan ends
Review
bcu
  • Be over the age of 18
  • Have another bcu product
  • Have a regular income
  • Have a good credit history
Review
Beyond Bank
  • Be over the age of 18
  • Be an Australian citizen or permanent resident
  • Earn more than $2,000 per month
Review
CommBank
  • Be over the age of 18
  • Be an Australian citizen or permanent resident
  • The car is less than 5 years old and not under finance
Review
CUA
  • Be at least 18 years of age
  • Be an Australian citizen or permanent resident
  • Have a good credit history
Review
Greater Bank
  • Be at least 18 years of age
  • Be an Australian citizen or permanent resident
  • Have a decent credit history
  • Be able to afford the repayments
Review
Heritage Bank
  • Be at least 18 years of age
  • Be an Australian citizen or permanent resident
  • Be able to afford the loan
Review
IMB
  • Be at least 18 years of age
  • Have a good credit history
  • Earn a regular income
Review
Latitude
  • Be at least 18 years of age
  • Be an Australian citizen or permanent resident
  • Have had a good credit history for the last 5 years
  • have had no bankruptcies for the last 7 years
Review
NAB
  • Be at least 18 years of age
  • Be an Australian citizen or permanent resident
  • Earn a regular income or wage
  • Be able to afford the loan repayments
Review
NRMA
  • Be at least 18 years of age
  • Be an Australian citizen or permanent resident
  • Have not defaulted on any loan or credit in the last 3 years
  • Have not entered into bankruptcy in the last 7 years
  • Can provide evidence of a regular income
Review
RACQ Bank
  • Be over the age of 18
  • Be an Australian citizen, permanent resident or an approved working visa
  • Have a good credit history
  • Earn a sufficient income to manage your repayments
Review
St.George
  • Be over the age of 18
  • Be an Australian citizen or permanent resident
  • The car you're buying will be less than 12 years old when the loan ends
Review
Stratton Finance
  • Be over the age of 18
  • Be an Australian citizen or permanent resident
  • Have a good credit history
Review
Westpac
  • Be over the age of 18
  • Have a regular permanent income
  • Be an Australian citizen or permanent resident
Review

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 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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IMB New Car Loan

You'll receive a fixed rate of 5.89% p.a.
A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one up to two years old.

Loans.com.au - New Car Loan

You'll receive a fixed rate of 5.44% p.a.
Finance a new car and benefit from features such as fast approval, no ongoing fees and an optional balloon payment.

Latitude Motor Vehicle Loan

You'll receive a fixed rate between 6.99% p.a. and 14.99% p.a. based on your risk profile
Apply for a loan from $5,000 to finance a new or used car. Flexible repayments and options to finance a classic car.

Stratton Finance New Car Loan

You'll receive a fixed or variable rate depending on the lender you are approved with
Apply for up to $100,000 and use cash or trade in a vehicle to use as a deposit. Optional balloon payment available.

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2 Responses

  1. Default Gravatar
    ChristinaAugust 11, 2018

    Retired with age pension and small pension from working in UK. Have very good credit rating. Require car loan, not necessarily new car but has to be from reliable seller. Have house here owned and valued $680-$690.000. What is the best way to go about this please.

    • finder Customer Care
      JohnAugust 11, 2018Staff

      Hi Christina,

      Thank you for leaving a question

      The best course of action would be to get a pre-approved car loan so you have an estimate budget on the car you want to purchase. You may click here to view our article on it. Once you are approved for the loan then you can visit any of the local car dealerships who can give you a good offer based on the amount you got approved for. As an addition, you may also visit this link for a quick checklist of what you need to look at when buying a used car.
      Hope this helps!

      Cheers,
      Reggie

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