Buying a car brings with it a number of decisions, but one of the most important ones is your finance. If you've decided to get a car loan it's important to find the most competitive and suitable product for you. That is, you want to find the best car loan.
This guide will take you through all of the features and costs you need to consider when sorting through your car loan options so you can be confident when making your decision.
Quick guide to how car loans work
Car loans work much in the same way as other personal loans, except that the vehicle you're purchasing is used to guarantee the loan. This is why car loans come with much more competitive rates – generally between 5-10% p.a. If you don't want to attach your vehicle to the loan, you can consider an unsecured personal loan to finance your car purchase. These loans come with a rate of between 7-20% p.a.
A car loan can be offered as a dealership finance loan or as a standard car loan from a bank, credit union or standalone lender. You can generally borrow between $1,000 and $100,000 with a car loan and loan terms can extend up to 7 years. The type of loan you are eligible for will depend on whether the car is new or used, how much the car is worth as well as your own credit history and financial situation.
What's the best car loan for me?
The best car loan is the one that helps you get the car you want for repayments that are affordable for you and offers features that meet your needs. To find this loan, you need to ensure the loan is competitive in terms of its interest rate and fees and that you are able to use it to buy the car you want (lenders have restrictions on age and value of the vehicle). You then need to look at other features, such as repayment flexibility, to ensure these all meet your needs. This is all detailed in the guide below.
How do you find the best car loan?
Here are a few things to keep in mind when you're comparing your car loan options above – this will help you find the best car loans for your needs and settle for one.
- How much does the loan cost? You need to consider both the interest rate and fees when asking this question. When looking at the interest rate, compare similar loans to each other to see if the standalone rate is competitive. Then, look at the comparison rate to see if the loan is still affordable and comparable when the fees are brought into the equation (the comparison rate is the interest rate + fees).
- Are the repayments flexible? See if you will be able to repay your car loan early without penalty or if you will be able to make additional repayments without being charged a fee.
- What are your loan terms? Car loan terms are generally your choice of between 1 and 7 years. The length of time you take out a loan will affect your loan repayments and therefore the loan affordability, so make sure you consider this.
- Is your car eligible? Can you actually finance the car you want with this loan? Some lenders have restrictions on the age of the vehicle or the type of vehicle, so ensure you'll be able to purchase the car you want before you apply.
- How much can you borrow? The loan amount you are offered by the lender will depend on a couple of factors. For most lenders your credit history and financial situation will be a determining factor, and for a secured car loan the amount will also depend on the cost of the car. Car loans are generally for between $1,000 and $100,000.
- What is the type of loan?
Take note of the specific type of car loan that you are looking at. This can be a new or used car loan, low-interest car loan, bad credit car loans or pre-approved car loans. The category type your loan falls under will help you compare it to other similar loans.
Five tips to get the best car loan
- Consider a newer vehicle. New car loans come with lower interest rates than used car loans because the lender is taking on less of a risk. Most new car loans don't require you to purchase a brand new car; you can usually secure a vehicle less than two years old for this loan.
- Quotes without credit enquiries. While credit enquiries are not always a bad thing to have listed on your file, too many enquiries can have a negative impact on your credit score. If you're submitting an enquiry for a car loan rate estimate make sure no hard credit checks are listed on your file. If a credit check is required, don't enquire with too many separate lenders.
- Detail all of your assets and finances when applying. Some lenders offer lower interest rates if you have a strong net position (assets minus liabilities). So even if you are applying for a secured car loan, listing your other assets may give you access to a better rate.
- Leave a down payment. If a lender sees you don't need to borrow 100% of the purchase price of the vehicle you may be eligible for a lower rate.
- Compare your options before you apply. This will show you which lender has the lowest rate car loans available. If you don't want to sort through your options yourself you can consider using the services of a car finance broker to help you find the best car loan options for your specific situation. Click on the "speak to a broker" tab above the table.
Have you weighed up the benefits and drawbacks of car loans?
- Depending on the lender, your car loan might have various restrictions on what you can use the loan amount for
- If the car loan is a variable rate option then you may find your rate change over the life of the loan, making it difficult to budget for your repayments
Found the best car loan for your situation? Here's what you'll need to apply
The type of information you will need to provide usually depends on the lender and the type of loan you have chosen. You will generally need to provide
- Proof of your identity with a passport or driver's licence
- Details of your finances including credit, debt and assets
- Proof of your income
- Details about the car (if you've found it) including make, model and year
For a secured loan you will also have to provide details about the vehicle including the Vehicle Identification Number, the dealership. Check with your lender before you submit your application.
Ready to apply?
To apply for a car loan, simply use the comparison table at the top of this page to compare your options. Once you have found the best car loan that meets your needs you can follow the secure link to the lender's online application form. The eligibility criteria differ between lenders, but you will most likely need to be over the age of 18 and be a permanent Australian resident to qualify.
Car Loan OffersImportant Information*
You'll receive a fixed rate of 5.49% 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 6.99% p.a.
Apply for a loan from $5,000 to finance a new or used car. Flexible repayments and options to finance a classic car.
You'll receive a fixed rate from 5.69% 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. Note: Product only available to residents of Victoria.
You'll receive a fixed or variable rate depending on the lender you are approved with
Apply for up to $150,000 and use cash or trade in a vehicle to use as a deposit. Optional balloon payment available.
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