Going Green: Polestar embraces the shift to electric cars
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Read more…New Car Loans
Learn how to find and compare new car loan options. It could save you hundreds.
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How new car loans work
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 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.
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 is the difference between fixed and variable new car loans?
Variable rate car loans
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 might increase if the rates go up. Your payments may also come down if the rates start to fall.
Fixed rate car loans
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.
How to compare new car loans
- Check interest rates
Compare interest rates and find the lowest option. Your interest rate will be personalised according to your credit history. - Watch out for fees
Car loan application and monthly service fees can cost you hundreds of dollars. - 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. - 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.
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Read more…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 which 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 fills your coffers so you can buy a new car.
- It spreads the cost over several years.
- New cars are generally easier to finance, so you could find a lender without fuss.
- You get a new vehicle, benefiting from improved safety equipment, fuel efficiency, technology and passenger comforts.
- 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, through depreciation.
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 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.
What we thought of these new cars...
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The Kona N starts from $47,500 and at this price point it is currently in a class of its own at the moment.
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2022 Polestar 2 long-range dual motor review
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2022 Mitsubishi Eclipse Cross PHEV review
The 2022 Mitsubishi Eclipse Cross PHEV offers great flexibility and fuel savings on paper, but how does this promising package stack up in the real world?
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2022 Isuzu MU-X LS-T Review
The previous generation MU-X earned a reputation for being hard-working, reliable and a value proposition. Does the new 2022 model live up to the reputation?
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2021 Abarth 595 Competizione Review
I bet you haven’t seen many of these on the road before – it’s an Abarth 595 Competizione.
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2022 Kia Cerato Sport+ hatch review
Kia's facelifted 2022 Cerato offers an enticing package on paper and makes for a great city commuter, but it's let down by an unenthusiastic engine.
Read more…Car insurance for your new car
While CTP insurance is a legal requirement in Australia, taking out additional comprehensive or third party cover is highly recommended. Avoiding additional car insurance could mean unforeseen expenses if you were ever involved in an accident, even if it was not your fault. Our extensive car insurance guide will give you all the information you might need about insurance, its types, costs and more. You'll also be able to compare insurance providers and get quotes side by side.
Compare car insurance in Australia
