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You can save money with a green car loan in Australia plus do your part for the environment.
Many lenders now offer better rates on car loans for vehicles that are considered environmentally friendly.
Key takeaways
Green car loans offer lower interest rates if you're buying an eligible electric or hybrid vehicle, which could save you hundreds over the loan term.
Check your car's eligibility carefully—each lender has its own list of approved models and criteria.
If you're considering a green loan, check whether it comes with restrictions like minimum loan amounts or shorter terms, which can affect your repayments.
The mechanics of electric vehicle loans
An EV loan operates similarly to a standard secured car loan but features a discounted interest rate as an incentive for reducing carbon emissions. Many Australian lenders are now prioritising these products to support the transition to cleaner transport. These loans are specifically tailored for battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) because these models meet strict CO2 emission standards.
Finder survey: Would Australians of different ages consider a green car loan to buy an EV?
Response
Gen Z
Gen Y
Gen X
Baby Boomers
No
58.43%
49.18%
56.91%
74.15%
Yes
41.57%
50.82%
43.09%
25.85%
Source: Finder survey by Pure Profile of 1113 Australians, December 2023
Financing for EV charging equipment and home wallbox installation
A common pain point for new owners is the upfront cost of infrastructure. Many green car loan packages now allow you to bundle the cost of EV charging equipment, home wallbox installation and associated hardware into the total loan amount. This allows you to spread the cost of your home charging setup over the life of the loan rather than paying thousands of dollars upfront.
What is a green car loan?
A green car loan is any vehicle finance option available for cars that are better for the environment, generally meaning those with lower than average emissions. These include hybrid and electric vehicles, as well as normal cars with noticeably better fuel efficiency.
When considering the total cost of ownership, insurance premiums play a major role. Understanding insurance terminology is essential for local drivers. The premium is the amount you pay for the policy, while the excess is the out of pocket cost you agree to pay if you make a claim. Many insurers also offer a no claims bonus, which rewards safe drivers with lower costs over time.
WATCH: How to save money on an eco-friendly vehicle
2:52
How does a green car loan work?
A green car loan effectively works the same as any other car loan. If you apply for a loan for a vehicle that meets the lender's definition of environmentally friendly, you will generally receive an interest rate discount of 0.5%-1% and may be exempt from certain fees.
In addition to a discounted rate, some lenders will also offset your carbon emissions for the term of the loan to help reduce your carbon footprint.
You will generally apply for a green car loan like you would any other car loan, and simply select the green car loan option during the application process.
How do I know which cars can be used on a green car loan?
While the list of eligible vehicles will vary by lender, a car may be eligible if it meets one or more of the following requirements:
It is a new vehicle
It is a hybrid or electric vehicle
It is more fuel efficient than the average car in its class
Some of the popular car models that may be eligible include:
Battery Electric Vehicles (BEVs)
Tesla Model Y
Tesla Model 3
BYD Atto 3
BYD Seal
BYD Dolphin
MG4 EV
Hyundai Ioniq 5
Hyundai Kona Electric
Kia EV6
Polestar 2
Nissan Leaf
BMW i4
Mercedes-Benz EQB
Volvo XC40 Recharge
Cupra Born
Plug-in Hybrids (PHEVs)
Mitsubishi Outlander PHEV
Kia Sorento PHEV
Hyundai Santa Fe PHEV
MG HS Plus EV
Volvo XC60 Recharge
BMW X5 xDrive45e
Ford Escape PHEV
Mini Countryman SE All4
Hybrid Vehicles (HEVs)
Toyota Corolla Hybrid
Toyota Camry Hybrid
Toyota RAV4 Hybrid
Honda Accord Hybrid
Hyundai Ioniq Hybrid
Kia Niro Hybrid
Lexus UX 250h
Subaru Forester Hybrid
However, you will need to check with the specific lender to see if a certain vehicle is eligible, and not all versions of the same model will necessarily meet the criteria.
If you're just searching for a car that has a limited environmental impact, you can use the Government Green Vehicle Guide to find a vehicle.
What are the benefits of a green car loan?
Interest rate discount. Most green car loans offer you a reduced rate as part of the loan.
Saving on car running costs. As green cars are more fuel efficient, you will likely be paying less to drive your car.
Reducing emissions. Green cars also have lower-than-average CO2 emissions and help protect air quality and the environment.
Frequently Asked Questions
Many lenders in Australia offer green loans, including MOVE Bank, Bendigo Bank and loans.com.au, which you can use to purchase an eco-friendly vehicle.
Green car loans can come with competitive interest rates and are a worthwhile option if you're thinking about buying a more environmentally-friendly vehicle.
Tom Stelzer is a journalist with 6 years of experience covering personal finance, specialising in investment and cryptocurrency. With a Master of Media Arts and Production and a Bachelor of Communications in Journalism from the University of Technology Sydney, Tom provides expert analysis on digital assets and market trends, helping readers navigate the fast-evolving world of finance.
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