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Looking at how you can finance the purchase of a used car? You might want to consider getting a used car loan. This guide will help you understand everything you need to know about buying a second-hand car with used car finance.
What is a used car loan?
Used car loans come in two main types: secured and unsecured. With secured car loans, the vehicle you purchase is held as collateral against the finance. As a result, lenders will offer a more competitive interest rate – which can help save you money. With unsecured car loans, you have more freedom on how you spend the money and no collateral is taken but as there is more risk for the lender, you will get a higher rate. From fixed rate From comparison rate 100% confidential application Get access to a car loan from $2,000 to $100,000 on terms of 3, 5 or 7 years. Rates are tailored to your loan term and securing the loan is optional.Plenti Car Loan
Plenti Car Loan
4.89 %
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5.44 %
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Plenti Car Loan
Used car loans in Australia
You can compare up to four car loan providers on your PC or Mac and up to two providers on your mobile phone when you check 'Compare'. You can get more information about each provider when you hit 'View details'. Clicking 'Go to site' will securely take you to that provider's website.
How do used car loans work?
A used car loan is a straightforward agreement between you and a lender. They'll advance you up to $100,000 to put towards the purchase price of a second-hand car and you pay them back according to a pre-agreed schedule. After the final used car loan payment clears, the car is 100% yours.
How can a bank reposes a car?
With a Secured used car loans, your chosen lender registers a security interest with the Personal Property Securities Register. In the event you fail to meet the loan repayment schedule, they can claim possession of the car and recoup their losses. With less risk involved, the lender will give you more competitive interest rates.
Unlike new car loans, there are vehicle age requirements applied to used car loans.
How does it work with an unsecured used car loan?
With an unsecured loan, you don't need to offer your used car as security and there are less age and value conditions your car needs to meet. You're also free to spend money on related costs like rego, CTP or modifications, as well as unrelated expenses.
Lenders give you the option to pay back the loan over terms between one and seven years.
3 used car finance options and their differences
What type of finance is available for purchasing a used car?
- Secured loan. Certain vehicles, under a few years old, may qualify for this type of loan, which usually offers the most competitive interest rates.
- Unsecured car loan. These loans have higher interest rates, but fewer restrictions attached to them.
- Dealership finance. Car dealers will likely offer some attractive rates with their chosen finance partner. However, often these agreements are subject to hefty deposits and balloon payments, which require you to make a final payment of several thousand dollars. This way, the repayments are smaller and seem cheaper.
What age car can I buy with a used car loan?
It depends on the lender and the type of loan you're taking out. If it's a secured car loan, the finance company is looking to make sure they always have a plan B. That way, if you breach your contract or suddenly stop making repayments, the company is legally able to reclaim the car and sell it, to offset their losses.
That means, they'll require that the car being purchased is under seven years old. Generally, they tend to be looking for the car to be no older than 12 years by the end of the loan period.
Here's a table of the maximum ages of cars accepted by different loan providers.
| Lender | Product name | Maximum age of car | Loan amount | Find out more |
|---|---|---|---|---|
| Beyond Bank | Beyond Bank Low Rate Car Loan | 6 years | From $5,000 | Details |
| Beyond Bank | Beyond Bank Flexi Car Loan | Over 6 years | From $5,000 | Details |
| CommBank | CommBank Secured Car Loan | 5 years | $10,000 to $100,000 | Details |
| CUA | CUA Secured Fixed Car Loan | 7 years | From $5,000 | Details |
| Driva | Driva Car Loan | 7 years | $2,000 to $250,000 | Details |
| loans.com.au | Loans.com.au - New and Dealer Used Car Loan | 7 years | From $5,000 | Details |
| IMB | IMB Secured Personal Loan | 6 years | $2,000 to $60,000 | Details |
| NRMA | NRMA Used Car Loan | 10 years | $5,000 to $130,000 | Details |
| OurMoneyMarket | OurMoneyMarket Car Loan | 10 years | $2,001 to $75,000 | Details |
| People's Choice Credit Union | People's Choice CU Discounted Personal Loan (Car Loan) | 10 years | $20,000 to $100,000 | Details |
| RACV | RACV Used Car Loans | 10 years | From $5,000 | Details |
| St.George Bank | St.George Secured Personal Loan - Fixed Rate | 12 years at loan expiry | $3,000 to $80,000 | Details |
| Suncorp Bank | Suncorp Bank Secured Car Loan | 7 years | $5,000 to $80,000 | Details |
| Symple Loans | Symple Loans Personal Loan | 7 years | $5,000 to $80,000 | Details |
| Westpac | Westpac Car Loan | 7 years | $10,000 to $100,000 | Details |
Used car loans Australia
- IMB Secured Personal Loan: 6.8% p.a. comparison rate. A car loan with a competitive rate that allows you to finance a used vehicle up to 5 years old.
- RACV Personal Loan: 7.19% p.a. comparison rate. A personal loan that allows you to finance a used vehicle up to 7 years old.
- NRMA Used Car Loan: 7.19% p.a. comparison rate. A used car loan with no monthly fees.
- Bank Australia Car Loan: 6.66% p.a. comparison rate. A car loan suitable for used vehicles that also offsets your carbon emissions.
Pros and cons of buying a used car
| Pros | Cons |
|---|---|
| If you (or someone you're acquainted with) knows a bit about cars, you can save yourself tens of thousands of dollars purchasing a used vehicle | Without doing your research, you could buy a lemon with premature failures, defects or dodgy repairs |
| With warranties lasting up to seven years, you could still buy a used car with a decent chunk of its factory warranty and roadside assistance left | Takes time browsing the Internet and picking up the phone to find a car you want to test drive |
| Let someone else pay for the first few years' depreciation (according to RACQ, it could be as much as $299.12 per week, worst case) | Previous owner might have neglected to maintain the car or driven it hard |
| Less likely to encounter a salesperson using high-pressure selling strategies | Car could be out of factory warranty |
| No waiting for a car to be built at the factory, you can purchase a car there and then | Limited by what's currently on used car market |
| You could get a hybrid or electric car for a significant discount | Tighter financing conditions |
| Buying private cuts out dealer, meaning you're not paying a margin to cover their overheads | Certain vehicles might need a roadworthiness certificate or safety inspection |
| Used high-end models could be within your budget | |
| Sellers expect to haggle and negotiate | |
| Lower value can mean lower car insurance costs |
How to find the perfect used car loan
Here's what you need to consider when shopping for a used car loan:
- Interest rate. Generally speaking, you want as low an interest rate as possible. The lower this number, the more you'll save. The difference can be quite stark. Suppose you want to borrow $10,000 over 3 years to purchase a second-hand car. If you took out a loan with an interest rate of 4.5%, the loan would cost you $709 in interest. If the rate was 7%, you'd pay $1,116 in interest, a difference of $407. Due to the potential risk of a used car failing prematurely, interest rates will likely be higher for a second-hand car.
- Payment flexibility. It's always nice if a loan fits in with your budget. If you get paid weekly, you'll no doubt prefer a used car loan lender that offers weekly repayment schedules. If you're paid monthly, you're probably more used to making larger payments, 12 times a year.
- Loan term. The longer you borrow the money over, the more potential risk and the more you'll spend in interest. On the flip side, the repayments will be smaller, as the cost is spread across a longer period. For example, a used car loan with an interest rate of 4.5% over 3 years costs $709 in interest, with monthly repayments of $297. Over 5 years, the monthly payments are just $186, but the amount paid in interest jumps to $1,186, or a $477 difference. Deciding on how long to take out your used car loan comes down to balancing affordability and expenses.
- Charges and fees. Many loans require application fees, which can vary from $200 to $800. Other loans may charge a service fee, which could be as much as $10. As a result, you need to factor in these costs. A loan with a $10 monthly service fee, over 3 years will cost you $360. However, if the loan has a low application charge, it could still work out as the most cost-effective solution for you.
- Vehicle criteria. This seems obvious, but you'll want to pick a lender that's prepared to offer you a used car loan for the age and model of vehicle you're looking at.
- Pre-approval. This is a big one if you're buying a used car. Conditional pre-approval means you know how big a loan you can get. This puts you in a great place when haggling.
- Early payment fees. It's nice to have options like the ability to pay back your used car loan early, without termination fee penalties (for example, if you traded your old car in for another and want to clear the outstanding balance, or you come into some money).
- Other features. A redraw facility, where you can claim back any money you've overpaid, might be useful.
Watch: Should you get a loan for a used car?
Used car buying money-saving tips
As well as shopping around for a great used car loan deal, you can save yourself even more money with these tips.
Consider less popular brands and models
The bestselling new cars will almost certainly become popular used car models. As a result, sellers can set their prices accordingly. Rather than getting fixated on one brand or model and trim, be open to rival models. You'll benefit in several ways. First, car manufacturers that are trying to compete with a sought-after and established marque might introduce longer warranties, better standard specifications and even drop prices. You could swoop in and take advantage of this by purchasing the rival brand on the used car market.
To save money, buy privately
Used car dealers are a middle party. Yes, they might offer attractive things like short-term warranties, but in reality, they can add a couple of grand onto a car's sticker price to cover their costs.
If you have a car enthusiast friend or family member, take them along to a private sale and you could end up with a much cheaper used car. If you don't know a car expert, consider paying for a pre-purchase inspection, which can help you avoid buying a lemon.
Haggle
Some people hate haggling, it makes them cringe. Most second-hand car dealers and private sellers will expect you to at least try. Some may even mark their car up a little, with the expectation that buyers will try to knock them down. Remember, this is a business transaction, so stay friendly and emotionally detached from the car.
Haggling doesn't have to become a verbal slanging match. You can be polite and negotiate – sometimes even being a bit cheeky might get you some money slashed off the deal. If you smile while you're doing it, that goes a long way. A common technique for bartering is to simply point out things you're not happy with, for example the tyres are heavily worn and need replacing, the windscreen is scratched or there are stone chips in the paint. If you are sincere and genuine, a lot of sellers will relent and meet you halfway. Spend some time researching the car model; find out if it needs any major scheduled work soon like timing chain/belt replacements or complete fluid renewals.
Phrase things in a positive way. Instead of saying "I want some money off", try asking "How much money are you willing to knock off?".
Equip yourself to haggle like a pro by looking up the market values of the car you're viewing. This can be done on sites like redbook.com.au. That should help you cut through the chancers who are trying to flip a car by buying it, giving it a valet and selling it on.
Never, ever let the seller know your budget. Also, remember that a lot of private sellers need to sell their car. They might have bought a new one and are currently paying for two vehicles!
If you're buying from a used car dealer, it helps to know the prices of similar or exact models on sale by their competitors. Then you can say "Company X is doing this car for this amount, can you match it?" Some people suggest even printing out the sales listing to show them.
The most powerful negotiation technique is always being prepared to walk away. Sometimes, you'll get a call later and suddenly the seller can meet your offer. If something's not right about the car or the seller, cut your losses and move onto the next prospective used car.
Above everything else, stay calm and never rush into things!
Consider a previous generation model
If the car you're after has recently received a facelift or been replaced with an updated model, the previous generation might drop in value. That means you can cash in by purchasing the older car.
Step down a trim level or two
It's tempting to want every creature comfort on offer in a used car, but if you're willing to step down a trim grade or two, you can save hundreds, if not thousands of dollars.
Be flexible on the odometer
You might see a used car that's covered thousands of kilometres more than a similarly aged vehicle. Don't discount the higher mileage model outright, because modern engines work better when up to full operating temperatures.
Around town driving, with short intermittent runs, the car doesn't always get up to temp. Plus, those urban roads are covered in potholes that really hammer the car's suspension and bushes.
If a car has covered 20,000km, but this was all around town, while another has done 50,000km (with a lot of motorway driving and excellent maintenance), then the higher clock reading car should be cheaper and potentially be in just as good (if not better) mechanical condition.
Used car loans frequently asked questions
Should I buy a car that's under finance?
We've written an entire guide covering the topic of whether to buy a car under finance (known as an encumbered car). Though there's nothing wrong with buying a second-hand car that's financed, you need to be extra cautious and make sure you do your due diligence before buying.
Are used cars safe?
You're probably familiar with the ANCAP crash testing and rating scheme in Australia. These star ratings are for new vehicles. For used cars, you'll want to refer to the Used Car Safety Ratings, or USCRs. These are published over at howsafeisyourcar.com.au. Bear in mind that the condition of the vehicle's bodywork and mechanical components plays a big part in its crash safety. Also, the level of corrosion is a key factor. Don't forget to check for any outstanding recalls on the vehicle make, model and build year.
How do I inspect a used car?
In short, very closely. Don't take the seller's word as gospel. Prove to yourself the car is in sound condition and working order. To help, we've created a used car buying guide checklist.
Are used cars reliable?
It depends not only on the model, but also on how well it's been maintained and how hard the car has been driven. One unique thing about buying a used car is that time has passed since the launch and a lot of the common mechanical faults have been discovered. You can check for these online and also read verified owner reviews.
I've previously declared bankruptcy; can I get a used car loan?
Some lenders are open to considering a person who has previously petitioned for bankruptcy. Check out our loans for bankrupts guide.
I'm a student and want a used car loan
If you need to buy a car and you're a student, see if you're eligible by visiting our student car loans page.
I'm self-employed and want to purchase a used vehicle
If you need to buy a car or commercial vehicle for your business, you'll want to check out low-doc car loans and business vehicle finance.
*The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our Site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.
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Ask an Expert
I am looking to secure a $50,000 car loan. I have been told that you can pay off lump sums without penalties with some finance companies, but I am a little skeptical of this. Please clarify.
Regards.
Steve
Hi Steve,
Thank you for getting in touch with finder.
Repaying a car loan early without penalty is another common feature of variable rate car loans, however it is still best to check if you are able to make extra or lump sum repayments as well as if an early prepayment or early termination fee applies.
I hope this helps.
Please feel free to reach out to us if you have any other enquiries.
Thank you and have a wonderful day!
Cheers,
Jeni
I’m currently bankrupt and have gained casual employment and need a car am I able to apply for a loan somehow
Hi Jade,
Thanks for leaving a question on Finder.
You can get a loan if you are a discharged bankrupt or even if you are currently bankrupt. You will be more limited in terms of the lenders you have to choose from, and the fees and rates will also be higher on bankrupt loans. You may also be required to attach an asset as security or apply with a guarantor. You may click the link above to find out about your loan options and see what you might be eligible for.
You may click the name of the lender to be redirected to our review page and learn more about the lender’s loan offer, rates, and requirements as well as the pros and cons of using their loan service. When you are ready, you may then click on the “Go to site” button if available and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
Cheers,
Joel
I am a PhD student and am struggling to find a car loan as most places aren’t accepting of the scholarship as a wage – is there any places I should try applying for?
Hi jj93,
Thanks for your inquiry.
When getting a car loan and you’re a student, it’ll be worth doing your homework on which lender would accept your form of income whether it be from casual work, permanent part-time work, or Centrelink payments. Not sure though for scholarship wages. Also when getting a student car loan, you may need to have a guarantor or co-borrower who can take on the legal and financial responsibility for the debt incurred with your car loan if you default or fail to make the repayments.
While we can’t recommend a specific lender to you and are not sure of your approval, you may like to check the guide on student car loans. On the page, is a comparison table you can use to see which lender suits you.
When you are ready, you may then click on the “Go to site” button and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
Cheers,
May
Hi Im looking at purchasing a 1986 Van for work, I have owned and operated a company since 2012.
What is my most affordable options
Hi Michael,
Thank you for reaching out to us.
If you are looking for a used Van, you may refer to the above list of lenders that offer used car loans. If you’ve chosen a brand and you think you are eligible, please click on the ‘Go to site’ button to be redirected to the lender’s official site and apply from there. Otherwise, some other car loans you may consider and compare are on these pages:
I would suggest that you review the features and details of the loan and the eligibility requirements and consider whether the loan is right for you. You can also contact the lender to discuss your options.
I hope this helps.
Please do not hesitate to reach out to us again if you have additional questions.
Cheers,
Ash
i want to borrow enough to paid off my existing car loan and buy two more cars one for me and one for my fiance . The two of us will be making the repayments
Hi there,
Thanks for your question.
If you are looking to borrow jointly to pay for your existing car loan and to have extra money, you may compare joint account personal loans and find the best one for you.
Cheers,
Anndy
Hi,
i would like to buy a used car and my budget is two lakhs.
so please advise me about the loan and how much i can get and what will be the interest.
Anticipating your replay,
HI Pious,
Thanks for your question.
Unfortunately, the loan products we have listed on our page are only available to Australian residents.
You may have to directly contact a local lender for your borrowing needs.
Cheers,
Anndy
Can a 457 visa holder who just arrived in Australia get a second hand car financing? If yes, what should be the requirements?
Hi Patricia,
Thank you for your inquiry.
You may want to check our guide on getting a personal loan if you are on a visa. Please review the criteria, details of the loan product and contact the lender directly to discuss your loan options and eligibility.
Cheers,
May
Any recommendations for a car load for some on centrelink benefits? Credit rating is good and there are no defaults or similar. Never been bankrupt or anything like that
Hi Dragan,
Thanks for your question.
Kindly note that we are a financial comparison and information website and we are unable to recommend specific products or services to our users.
In the page above, you can take advantage of the loan calculator to see which loan product can give you low monthly repayments. Before clicking the ‘go to site’ button to submit an application, be sure to read the eligibility criteria and requirements needed by clicking the name of the loan on the table.
Cheers,
Anndy
Hi my name is Teresa I’m trying to get another car or ford wheels I’m on a pension I have now $700 put away for a car can anyone help me
Hi Teresa,
You may check our pensioner loans page and find a full list of loans available to those on pension.
I hope this will help,
Elizabeth
Hi
Currently I have on going loan with Macquarie finance and interest rate is around 12% p.a with 3 years remaining. Balance amount is $26k.
My monthly payment is $780.
I want to change for lower interest so I’m planning to refinance. To do that I was asked to pay a cancellation fee.
Would you know what is the average penalty fee in the market for comparison?
Hi Rodrigo,
You may want to check a list of early repayment fees through our website.
Hope this helps,
Elizabeth