Best Car Loans Australia
Finding the best car loan rates could save you hundreds if not thousands of dollars.
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In this guide, you'll learn:
- How to find the best car loans
- What to look for in a car loan
- How to understand the car loan application process, the lingo and costs
- Expert money-saving tips for your new car purchase
Must read: Looking for the best car loan?
There’s no single loan that’s best for everyone as all our needs are different - and what’s best for you might not be best for someone else.
What is a car loan?
A lender will advance you up to 100% of the funds needed to buy a new car. Car loans are a specialised personal loan. Secured car loans use the vehicle you purchase as security against the finance. The upside of using your vehicle as collateral is lenders can offer you a more competitive interest rate. In short, it'll save you hundreds, if not thousands of dollars, over the loan term.
Alternatively, unsecured car loans have fewer conditions attached to how you spend the money and which vehicle you can buy. Car loans are available from finance brokers, credit unions, banks and car dealerships (through in-house or partner financing).
Lenders offer new car loans between $2,000 right up $250,000. You can choose to repay a loan over one to seven years. However, the amount you can borrow is dependent on your eligibility and takes into account things like your credit history and current financial standing.
What's the best car loan for me?
Here's a secret to finding your ideal car loan. The perfect loan would:
- Allow you to buy your desired car (some loans are subject to vehicle age and value restrictions)
- Have comfortably affordable monthly repayments (you're not overstretching yourself)
- Have a competitive interest rate - the lower the interest, the bigger the saving you'll make over the loan agreement
- Carry minimal on-going costs, like monthly service fees and application charges
If you can tick all those boxes, on paper, you're on the way to finding the best car loan for your situation.
You might also decide that you want a loan with a redraw option. If you've repaid more than you need to and are ahead on your car loan, some lenders will let you borrow the extra back.
Best car loans for the self-employed
If you're self-employed, you might want to consider low documentation car loans (low doc car loans).
Why take out a car loan?
Most commonly, you don't have the money to pay for the car outright.
In reality, there are dozens of reasons you may choose to take out a car loan. You might prefer to break the cost of a new car down into manageable monthly amounts. Or, you might have noticed there's a surplus in your budget each month, which could be put towards on replacing your aging car. Then again, maybe your mechanic has told you it is no longer cost-effective to keep repairing your current car, as it requires major work to fix.
Taking out a car loan means you can get the exact vehicle you want, without having to spend years stashing away money to build up your savings. Speaking of savings, they can stay where they are in the bank, untouched.
It also means you could go for a higher specification model than you would otherwise be able to afford if you were purchasing a car outright.
How to pick the best car loan deals
The car loans comparison table above shows several vehicle finance examples. How do you weigh each one up to pick the best car loan that fits your circumstances? Ask yourself these questions:
- How much does the car loan actually cost? Rather than looking at just the fixed interest rate, you may find the comparison rate helpful. This number includes the interest rate, as well as the known loan fees and any application costs. It also factors in the frequency of repayments, in addition to the specified finance term and the loan's value. It doesn't include government charges. Comparison rates can help to give you a better overall understanding of the loan cost and to avoid being swayed by attractively low looking fixed interest rates. The monthly repayment column is also useful, as it's likely the number you can most relate to. These are example dollar amounts, so you can see how much each repayment will cost you and decide whether you can afford them.
- Are the repayments flexible? It's always nice to have some flexibility in the repayments, especially if you find yourself in a position to pay back more, or even settle the loan in one fell swoop. Depending on your car loan lender, you could potentially save money doing this. However, there may be early repayment and admin fees to consider - in reality, it could potentially cost you more to pay off a car loan early. If you are in a position to pay the loan back early, finding a car loan that has little or no early repayment fees could be a feature to look for in the best car loan.
- How long is the loan term? The quicker you can pay off a loan, the less time you'll spend paying interest. You can save thousands of dollars over a car finance agreement paying it off over a shorter period. Here's an example, with an interest rate of 5%:
Amount borrowed Loan Term Interest paid Difference $30,000 Three years $2,369 $30,000 Five years $3,968 +$1,599 $30,000 Seven years $5,617 +$,3248
The more you can afford to repay each month, the shorter the car loan term you can select, potentially saving you thousands of dollars in interest as a result.
On the flip side, paying a loan over a longer period means lower repayments, because it spreads out the cost. You need to balance affordability with the cost of borrowing.
- Is the vehicle you're buying eligible? Surely, you can buy any car you'd like with a loan, right? Unfortunately not. Remember, secured car loans use the vehicle as security, meaning, if you fail to make repayments, they can repossess the car. This offsets some of the risks in the eyes of the lender. That means they set specific age requirements most commonly. If you want to buy a used car, make sure that it meets the loan company's criteria. If you're buying a classic or vintage car, you'll want to check out classic car loans.
- How much can you borrow? The amount of money a lender will make available to you is calculated primarily using your personal credit history and current financial situation. Depending on your circumstances and the car you're purchasing, you could be loaned anywhere between $1,000 up to $100,000.
How much does a car loan cost?
The true cost of a car loan depends on five things:
- How much you're borrowing
- How long the loan period is
- The interest rate
- Application fees and monthly charges
- Possibly early repayment or exit fees
That's before you have to include things like registration (rego), car insurance, vehicle maintenance, fuel, roadside assistance, CTP, depreciation and servicing costs.
If you think you have found the best car loan for your situation, you can use our car loan monthly repayment calculator to see how much a loan will cost.
I'm looking for the best car loans, but there are so many different loan types
Because everyone is different and the type of cars we drive vary, lenders have put together specialised car loan packages.
|I'm a buying:||Then consider:|
|A used car||Used car loans or unsecured car loans|
|From a car dealer||Pre-approved car loans|
|A modified car||Unsecured car loans or personal loans|
|A car, but I have bad credit||Bad credit car loans|
|A classic car||Classic car finance|
|A high value or luxury car||Luxury car loans|
|I'm getting Centrelink||Loans for people on Centrelink payments|
How to save money on car loans
When it comes to making your money go as far as possible, every single cent counts. Here's how to rack up the savings on your new or used car purchase.
Choose the right loan term
As you may have seen above, there are thousands of dollars in savings to be found between a three year and a seven-year car loan. Make sure you pick the right loan period so that you hit that sweet spot between affordability and the amount of money you pay out in interest.
Shop around for car loans
Make sure you compare all of your loan options. If you can find a loan without any on-going service fees, you could save between $180 and $297, across a three year car loan. Likewise, if you find a loan without an application fee, you'll save from $200 to $700! If you add in savings from a loan with a low rate of interest, you could be looking at thousands of dollars in your pocket!
Opting for a secured car loan will give you a far more competitive interest rate versus an unsecured car loan.
Shop around for cars and haggle
Being savvy and shopping around can save you thousands of dollars on a new car. Shop around during the EOFY sales, when manufacturers slash considerable sums from the driveaway prices of new cars. If you can bag a runout model, again, you could net yourself substantial savings. You might also be able to grab online-only offers and that's before you begin negotiating with the dealer.
You might have your heart set on a specific model, but being open to dropping down the trim grades one or two notches could save you anywhere from a few thousand dollars to $70,000+, depending on the car manufacturer. Also, don't go mad on the options list, you can add ten grand (or more!) onto some cars with just a few ticks of a box.
Guard your credit history
Having credit enquiries on your file isn't necessarily bad, but having too many could impact on your credit score! Make sure no hard credit checks are taking place, as these can get listed on your credit report. Remember not to enquire with too many separate lenders.
Disclose your assets
If a lender sees you have a very robust financial position (liabilities subtracted from your assets), they may offer you a lower interest rate. So list your assets, even on secured car loans, to unlock those cheaper rates.
What are the pros and cons of buying a car with a loan?
There are many benefits to buying a car with a loan.
- Break up the cost of purchasing a car, over a longer period
- Receive conditional approval before going to purchase a car
- Give you the power to bargain with a car dealer or seller
- Repayments that fit within your budget
- Enable you to buy a newer or more expensive car than you could otherwise afford with your savings
- You can build out your credit file
- Take advantage of the loans market competition
- There may be restrictions and conditions on the age and type of vehicle you can buy
- Variable-rate car loans may fluctuate, making budgeting less predictable
- Cars out of warranty could suffer a catastrophic failure, leaving you with a broken vehicle and an outstanding loan
- You have to pay for the loan, through interest
- The car will depreciate (unless it's a classic car or in some rare cases)
I've found my best car loan. Help me find a car
The amount of car makes, models, body styles, engines, optional equipment and features - even paint colours, can seem overwhelming. Here at Finder, we produce comprehensive comparison car reviews. These guides combine the findings of four or five expert car journalists. They help you save time and get a better overall sense of what a car is like to own.
|In my new car, I want:||Check out our:|
|To carry several passengers||SUV or Van reviews|
|A second family car||Hatchback or SUV reviews|
|An economical car||Hatchback reviews|
|An eco-friendly car||Battery Electric Vehicle or Plug-in Hybrid Electric Vehicle reviews|
|Something luxurious||Luxury sedan or SUV reviews|
|Something sporty||Performance sedan reviews|
|A vehicle for commercial use||Ute, SUV or Van reviews|
|To tow heavy trailers||Ute comparison|
|A fun toy for the weekend||Hot hatches comparison|
|To go off-road||Best ute off-road guide|
Who offers car loans in Australia?
In Australia, the main money lenders offering car loans are:
- Banks and financial institutions such as Beyond Bank, Heritage Bank, CUA or Commonwealth Bank for example
- Car finance brokers like Stratton Finance
- Car dealerships (with in-house or partner financing)
- Online lenders like loans.com.au
- Motoring clubs like RACV
There are pros and cons to each lender type, so do your due diligence, researching which car loan provider is best suited to you and your unique circumstances.
Here are the general (not guaranteed, as each lender is different) pros and cons
|Car finance brokers|
Found the best car loan for me. What paperwork will I need?
First, you need to be:
- Aged 18 or older
- Be employed or have a consistent income
- Be an Australian citizen or a permanent resident
Next, you'll need to gather:
- Proof of income
- Proof of ID (a passport, driver's license, birth certificate or Medicare card)
- Bank statements, three payment slips
- Employer's information or two year's tax returns (for self-employed)
- Details of assets (like cars and properties you own)
- Details of other loans and credit cars
- Vehicle specific details, including purchase price, colour, make, model, chassis number or the Vehicle Identification Number (VIN).
Then, follow the instructions on your car loan provider's website, or the application form.
Buying a car from a private seller
If you're buying a used car, or from a private seller, there are additional considerations you need to be aware of. Check out our used car buying tips.
Best Car loans summary
What's the TL;DR? Car loans are:
- Often a type of secured personal loan
- Generally between $2,000 and $100,000
- Repaid according to a schedule: Weekly, fortnightly or monthly
- Taken over one to seven-years
- Available through banks, car loan brokers, online lenders or car dealers
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Car Loan OffersImportant Information*
You'll receive a fixed rate of 4.99% 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.
You'll receive a fixed rate of 4.69% p.a.
Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.
You'll receive a fixed rate from 4.99% p.a.
A larger loan of $5,000 or more to help you buy a new or used car. 5-hour pre approval available and no ongoing fees.
You'll receive a fixed rate of 4.99% p.a.
Purchase a new or used car up to 2 years old and benefit from a fixed rate and no monthly fees. Pre-approval available within 5 business hours.
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