New Car Loan Interest Rates Australia

How new car loans work

The majority of new car loan products are secured loans, meaning the lender has the right to repossess the vehicle if you default on your loan. While this is a steep price to pay, it also means you get a lower interest rate. Getting a new car loan doesn't mean you have to buy a car from a dealership – the majority of lenders will accept a vehicle up to two years old from a second-hand car dealer or a private sale.

When you apply, you and your car will need to pass the eligibility criteria. Depending on how strict the lender is, you may need to use the entire loan amount on the car, although some lenders may allow you to borrow some extra money to cover the costs that come with buying a new car. You will need to repay the loan over the pre-agreed loan term.

What will influence my new car loan interest rate?

• Your credit score. Borrowers with good to excellent credit are more likely to get the lowest rates (from around 5.09% p.a.) compared to those with poor credit who may face rates above 15% p.a.
• Type of loan: A secured car loan (where the car is used as collateral) almost always comes with a cheaper rate than an unsecured loan.
• Type of vehicle: Some lenders offer discounts on rates for green cars like electric or hybrid models.
• The lender: Banks, credit unions and online lenders all set their own pricing, so rates can range widely - currently between 5.09% and 20.07% p.a.
• Loan term: Shorter terms often attract lower rates, while longer terms can cost more in interest overall.

Types of new car loans

Secured car loan

With a secured car loan, the bank is able to use the new car as security. That means it has a registered interest in the car and can repossess it if you default on your payments. The interest rate is lower than the rate you would get with an unsecured loan because a lender views it as less risky.

Unsecured car loan

An unsecured car loan works a little differently, as the bank or loan company does not hold the new car you are purchasing or any of your assets as security. If you fail to make your personal loan repayments, the bank has little power to do anything about it, except send reminders. When you've consistently lapsed on repayments, it will send a debt collector to try and obtain the money. Your assets are safe, but the lender could take you to court. In response to the increased risk taken on by the lender, the interest rates are raised when compared with a secured loan.

Bad credit car loan

If your credit report isn't quite as stellar as you'd like and you still want a new car, you should consider a bad credit secured car loan. These loans come with a higher interest rate due to the increased risk factor.

What's the difference between fixed and variable new car loans?

Variable rate car loans

A variable rate means the interest rate can fluctuate. Over the length of your loan your rate might go up or down (or both) depending on market interest rates. This means the repayments you're making at the start of your loan could change, and you need to be sure that you could meet your repayments if rates were to increase.

Fixed rate car loans

Fixed rate loans are usually a bit higher than variable rates, but you know that your repayments won't change throughout the loan term. If rates increase over the next few years, the fixed rate may end up being lower than the resulting variable rate. It's more common to find fixed rate car loans.

How to compare new car loans

When it comes to new car loans, the interest rate only tells part of the story. You're also going to want to:

1. Check the comparison rate. Compare new car loan comparison rates and find the lowest option. While your interest rate and comparison rate will be personalised in most cases, the comparison rate includes all fee's included in the loan.
2. Watch out for fees. Car loan application and monthly service fees can cost you hundreds of dollars.
3. Look for a loan with money-saving features. You can get out of debt faster and save money with a loan that lets you make penalty-free extra repayments. A redraw facility lets you pull out those extra repayments to spend in an emergency.
4. Choose a suitable loan length. Also known as loan term, this is how many years it will take to pay off your loan. A longer loan term makes your monthly payments cheaper, but you’ll pay more interest all up.

Pros and cons of a new car loan

Things to look out for with new car loans

• Once you have decided to take out a new car finance, it is essential that you work out all the costs associated with the car loan. The obvious things are the interest rates but there are other charges too. These may vary depending on the lender.
• Fixed interest rates are common among car loan companies and they will not change throughout the loan period. If you choose a variable interest rate, the loan provider could alter the interest rate at any time depending on the Reserve Bank rates.
• You should negotiate early repayment fees and redraw fees with the loan provider just in case your situation changes during the loan period.

Bank loans vs dealership finance

How much are Australians borrowing in car loans?

The latest ABS figures show that new car loan values reached a record high in the June 2025 quarter. Australians borrowed more than $4.9bn. These numbers were bolstered by record EOFY vehicle sales.

What are some new vehicles to consider?

Frequently asked questions about new car loans

• Should I put down a deposit?

  Some car loan brokers let you put down a deposit. If you can afford to put down 5-20% of the car loan value, you'll have to borrow less. Lenders calculate the risk you present using the loan-to-value ratio (LVR). Lowering your loan amount, compared with the value of the vehicle, can help tip things in your favour.

  As you're taking on some of the risk of the loan, a lender might offer you a more competitive interest rate. In the long run, if you crunch the numbers, this should save you money. As an added bonus, you'll have lower monthly repayment amounts.

• How can I work out my new car loan repayments?

  You can use the Finder car loan repayment calculator.

• When's the best time of year to buy a new car?

  There are a few times a year when you can grab a bargain on a new car.

  First, if a car is due a facelift as part of its product cycle – right when the new model arrives on the forecourt is a good time to purchase the runout car. If you can live with the older spec, you could save thousands of dollars. Sometimes, car makers raid the parts bin, adding extra tech and equipment to create limited edition, runout models.

  During end of financial year promos, car dealers run massive campaigns to sell off older stock. At this time, models with a previous year's build date or ex-demonstrator vehicles have thousands knocked off. Last year, the biggest saving we found was $36,910 off a BMW 6340i M Sport. The end of a calendar year might also be a good time, or early in the new year.

  Also, the end of each month might see car dealers hustling to meet their targets and more inclined to strike a juicy deal.

• Do any brands offer pre-approval? Should I get pre-approved for a car loan?

  If you want to buy from a dealer, knowing the exact amount you can borrow and how much it'll cost per month is a real ace up your sleeve.

  A pre-approved car loan is the answer.

• I'm on a pension, can I still get a loan?

  You may still be eligible for a loan from a bank or a short-term loan provider. Please take a look at our guide on personal loans for pensioners.

• New car finance eligibility criteria?

  Generally, to be eligible for a car loan, you'll need to:

  • Be 18 or older
  • Have a regular, verifiable income
  • Be a permanent resident of Australia, or possess an appropriate visa
  • Have an acceptable credit history

• What documents do I need to apply for a car loan?

  You need to gather up some documents. A lender might want to see:

  • Driver's licence
  • Details of your employer and employment history
  • Income info (from bank statements)
  • Details of assets
  • Proof of savings
  • Info about any other loans or credit you have
  • Expenses and bills

  You can find a checklist of documents for car loan applications on our main hub.

• What are balloon payments?

  Some finance agreements let you set a balloon payment.

  This payment is a final lump sum that clears the loan, right at the end of the finance term. The benefit is lower monthly repayments, but the downside is you need to find a hefty sum of money to settle the loan.

  Find out more about car loan balloon payments.

• How do I apply for a new car loan?

  You can apply over the phone or online. For most lenders, it takes up to 10 minutes. Some are quicker though.

  All you need to do is click the link in our car loans comparison table to visit the site of each respective lender.

Written by

Richard Whitten

Senior Money Editor

Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University. See full bio

Richard's expertise

Richard has written 688 Finder guides across topics including:

• Home loans
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