A pre-owned vehicle can make a good choice if you need a first or next car. You can get a good deal because you're not buying it brand new and there are can be more room to negotiate if it's a private sale. If you don't have the full amount ready to make your purchase, you have a range of financing options available to consider.
A used car loan works the same way as a new car loan. These loans use the vehicle you're purchasing as security and in return, you get a competitive interest rate. Read our used car loans guide below and find out all the options available to you.
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.
Bank Australia Car Loan: 6.66% p.a. comparison rate. A car loan suitable for used vehicles that also offsets your carbon emissions.
How does a used car loan work?
A used car loan works the same way as a new car loan. These loans use the vehicle you're purchasing as security and in return, you get a competitive interest rate. You can either apply for your loan first and get pre-approval so you know how much money you have to spend on a vehicle, or you can find the vehicle you want to purchase and then apply for your loan. Either way, the lender will need all the vehicle's details before you can be fully approved.
You can usually apply for a loan of between $2,000 and $70,000 and you will have between one and seven years to repay. Lenders will have restrictions on the type of car you can finance, for example, you may not be able to finance a vehicle which will be over 12 years old at the end of the loan term.
Repayment flexibility differs between lenders but you are normally able to select weekly, fortnightly or monthly repayments. You may be able to pay off your car loan early without penalty or make additional payments without additional fees.
If you are approved for the loan the lender may prefer to pay the car seller directly or may send the funds to you to pay the seller. Discuss this with your lender before you apply.
Watch: Should you get a loan for a used car?
How old a car can I finance with a used car loan?
If you want to use your used car as security for the loan, each brand has different criteria. Here are the age limits for some of the lenders you can compare in the table above:
There are usually two types of used car loans, a secured loan and an unsecured used car loan.
Secured car loan. These loans offer the most competitive rates as you are required to offer your car as security for the loan. Check that your used car will be eligible to be used as security and remember that it's likely you'll only be able to borrow as much as the value of the vehicle.
Unsecured car loan. If your vehicle doesn't qualify as security for a lender or you want to borrow additional funds for something else, you might want to consider an unsecured car loan is a loan. These loans come with slightly higher rates but also more flexibility in how you use the loan.
Dealership finance. When you're shopping for a car you will see a lot of dealership financed deals advertised and they are another option to consider. This financing works by you paying low interest and repayments for the majority of your term and then a balloon payment, usually a few thousand dollars, at the end of the term. Make sure you find out all the details of the finance before you apply.
How do I compare used car loans?
Securing the right finance is as important as finding the right car. Some car loan terms extend up to seven years, so it can be with you a long time. Here's what to look at to find the right finance:
Interest rate. The interest rate should be the first thing you should consider when you are comparing used car loans. Compare loans with similar features to ensure you get a competitive rate and make sure you look at the comparison rate as well as it includes fees as well as interest.
Fees. Lenders can charge a range of fees on used car loans. These can include upfront fees such as application fees, ongoing fees such as monthly and annual fees and penalties such as early repayment fees.
Flexibility. Find out how flexible your loan can be. Can you make additional and lump-sum payments during your loan term? Are you able to repay your loan early without penalty? If you do make additional repayments, can you get these back using a redraw facility, and are there any restrictions regarding this facility?
Common questions we're asked about financing a used car
Should I buy a car that's under finance?
Buying a car from a private seller that is currently under finance carries more risk. You need to make sure that you have proof the seller has paid off the remaining balance of the loan before you finalise the sale. Find out what else you need to know about buying an encumbered car in our guide.
How do I receive my loan funds?
Lenders differ on how they send you your approved loan funds. Some lenders may prefer to send the funds directly to the car seller while others may transfer the loan funds to your nominated bank account. Check how this will be handled before you apply.
If you aren't confident with cars then it's best to get the vehicle inspected by a mechanic. If you have a good understanding of cars then you can do the inspection yourself. Check out our used car inspection checklist to make sure you don't miss anything.
Is it better to buy a used car from a dealership or through a private seller?
There are benefits and drawbacks to both. A used car dealer will check the quality of vehicles before selling them so you know you there are unlikely to be massive faults or damages with the vehicle. However, you may find there is less room to negotiate and you may not get as good a deal. With a private seller, there is no quality control and if you don't have the vehicle thoroughly checked you could purchase a faulty vehicle, but there is more chance of a bargain.
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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.
You'll receive a fixed rate from 5.69% p.a. A larger loan of $5,000 or more to help you buy a new or used car. 5-hour pre approval available and no ongoing fees. Note: Product only available to residents of Victoria.
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