If you're looking to buy your first car or upgrade to a new one, a car loan can help you finance your new purchase. A variety of different car loans are available from banks, credit unions and dealerships. By comparing your options and knowing what features to look for, you can find the best deal for your situation. Find out all about new car loans in our guide below.
Credit Concierge Car Loan
Credit Concierge Car Loan
Competitive fixed rate
Balloon payment available
Same day approval
100% confidential application
Credit Concierge Car Loan
Get access to over 20 providers to finance a new or used car with fixed rates starting from 4.79% p.a.
The majority of new car loans 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 dealer or from a private sale.
When you apply, you and your car will need to pass 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 specified loan term.
Types of new car loans
Secured car loan. With a secured car loan, the bank is able to use the new car as security if you default on your payments. The interest rate is lower than the rate you would get with an unsecured loan because there is less risk for the lender.
Unsecured car loan. An unsecured 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 default on your personal loan repayments, the bank has little power to do anything about it, except send reminders, or when the default becomes serious, send a debt collector to try and obtain the money. Your assets are safe, but the lender could take you to court.
Variable rate car loan. A variable rate means the interest rate will fluctuate according to the Reserve Bank of Australia's cash rate while a fixed rate remains the same for the length of the loan's term. The variable rate might be cheaper now, but it can and will fluctuate with the market interest rates. This means your repayments can increase if the rates go up. Your payments may also come down if the rates start to fall.
Fixed rate car loan. By comparison, a fixed rate loan might initially be a bit higher than the variable rate, but you know that your repayments won't change throughout the loan term. If the rates increase over the next few years, it is possible that the fixed rate may end up being lower than the resulting variable rate.
Bad credit car loan If your credit file isn't quite as stellar as you'd like and you still need a new car, you can consider a bad credit secured car loan. These loans come with a higher rate of interest due to the increased risk factor. Read on to find out more.
How to compare new car loans
Listed below are the key factors you should consider when comparing new car loans.
Interest rate and comparison rate. You need to compare rates to check how competitive a loan is. The comparison rate includes additional costs, such as application fees, cost of the car valuation, legal fees and any other yearly or monthly charges that could be included.
Other fees and charges. There are some charges that are excluded from the comparison rate, such as early termination fees. The loan company should inform you of all possible charges before you finalise your loan agreement.
Redraw facility and extra repayments. These extra features can help you repay your loan earlier than expected. However, be mindful that costs related to redraw fees or early repayment fees and any cost savings, including fee waivers, are not part of the comparison rate and could have an influence on the loan's overall cost.
Eligibility and suitability. Will you be eligible for the new car loan and does your car meet the criteria set by the lender? You should check the minimum and maximum loan amounts on offer as well as the loan terms to ensure the loan is right for your needs.
Did you know
Finder not only helps you find and compare new car loans, but we also have vehicle comparisons. If you still aren't sure about what car you are going to purchase, read our car reviews and compare models against each other.
The benefits and drawbacks of a new car loan
It helps you make your new car purchase
New cars are generally easier to finance, so you could find a lender easily
The price of the car is often higher than the resale value of the car. This is because all loans attract interest and new cars can lose market value quickly.
Things to look out for with new car loans
Once you have decided to take out a new car loan, it is essential that you establish all the costs associated with the car loan with the loan provider. The obvious costs are the interest rates but there are other costs 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.
Matt Corke is the head of publishing in Australia for Finder. He previously worked as the publisher for credit cards, home loans, personal loans and credit scores. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time he has survived the dot-com crash and countless Google algorithm updates.
How likely would you be to recommend finder to a friend or colleague?
Very UnlikelyExtremely Likely
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We compare from a wide set of major banks, insurers and product issuers.
finder.com.au has access to track details from the product issuers listed on our sites. Although we provide information on the products offered by a wide range of issuers, we don't cover every available product. You should consider whether the products featured on our site are appropriate for your needs and seek independent advice if you have any questions.
Products marked as 'Promoted' or "Advertisement" are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options and find the best option for you.
The identification of a group of products, as 'Top' or 'Best' is a reflection of user preferences based on current website data. On a regular basis, analytics drive the creation of a list of popular products. Where these products are grouped, they appear in no particular order.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment.
We try to take an open and transparent approach and provide a broad based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labelling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.