Used car loan rates Australia

Types of used car loans

There are different types of finance that you can choose from when you're buying a secondhand car.

Secured car loans

The vehicle you're buying is held as collateral against the loan. You'll get a lower interest rate, but you put your vehicle at risk if you can't make repayments.

Unsecured car loans

Your vehicle will not be used as collateral against the loan, but this means interest rates are higher as there's more risk for the lender. You also get more flexibility around the car you buy, because the lender is less concerned about recouping the costs.

Dealership finance

Used car dealerships can offer some attractive rates with their chosen finance partner. However, these agreements often have hefty deposits and balloon payments, which require you to make a final payment of several thousand dollars. The repayments seem smaller and cheaper than they really are.

What should I look for in used car loans?

• Interest rate. The higher the interest rate the more expensive your loan becomes, and for an older used car you might end up with a higher rate.
• Loan term. Some used car loan lenders require the car to be under a certain age by the end of the loan agreement.
• Vehicle criteria. Make sure the lender is prepared to offer you a used car loan for the age and model of vehicle you're looking at.
• Pre-approval. Conditional pre-approval is great when buying a used car, because you know how much you have to spend while you're shopping around.
• Security. Check if the loan requires the car to be used as security. Some lenders won't allow the car to be used if it's a certain age. If it's a newer used car, you might not want to use it!

How old can a car be for a used car loan?

If you're buying a used car with a secured car loan, your lender has the right to sell your car to recover its costs if you can't repay the loan. This means the lender cares about the age of the car you're buying.

Many lenders only offer secured car loans for cars that are 6 to 8 years old or newer, based on our lender comparison. RACV accepts cars up to 20 years old, and OurMoneyMarket has no maximum car age. The older the car, the higher your interest rate may be.

An unsecured car loan doesn't require the vehicle as security. So the age of the car is not an issue.

Maximum ages of used cars accepted by different lenders in Australia

Pros and cons of buying 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

Well-known cars and best-sellers will undoubtedly go for a higher price than something less known. If you know you want that particular model, great! But if you have more flexibility and want to save on cash, a less popular car is the way to go.

To save money, buy privately

Used car dealers might offer attractive things like short-term warranties, but in reality, the cars can be more expensive to cover their costs.

Consider buying privately and bring along a car enthusiast to check over the car for you. If you don't know a car expert, consider paying for a pre-purchase inspection.

Haggle

I know, I know, most people don’t like the thought of haggling. But it can go a long way and many dealers or sellers will expect you to try. Remember, this is a business transaction, so stay friendly, a bit cheeky, and emotionally detached from the car.

Tips for haggling:

• Stay friendly and maybe even a bit cheeky!
• Don't get emotionally attached to the car.
• Don't request a discount, ask them how much they're willing to knock off first.
• Research the market value of the car beforehand.
• Point out any flaws, like worn tyres or chipped paint.
• Never reveal your budget.


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

Don't discount a car with higher mileage over one with lower mileage. Modern engines work better when up to full operating temperatures.

AIf Car A has covered 20,000km, but it was short around-town trips, then it’s likely the car didn’t get up to full temperature or faced urban problems like potholes. Car B might have done 50,000km, but with a lot of motorway driving and excellent maintenance, and could potentially be in just as good (if not better) mechanical condition.

How do I apply for a used car loan?

Once you've found a suitable used car loan, you can apply. Most lenders accept online applications. You will need:

• Your personal identification details.
• Evidence you can repay the loan (employment information, recent payslips).
• Details of the car you're buying (make, model, year, registration details).

Can you afford a used car loan?

Fill in our used car loan calculator to see how much your used car loan could cost you. You'll need to enter:

• Loan term. How long you want the loan to be in years (between 1 and 7 years is the norm).
• Rates and fees. Put in the loan interest rate and any loan fees.

Then you can see see how much you'll end up paying.

Your loan details

Loan amount

$

Term

Repayment type

Principal & Interest

Interest rate

%

Interest only period

1 year 2 years 3 years 4 years 5 years

Payment frequency

Monthly Fortnightly Weekly

Extra monthly repayments

$

Overview of your loan

Once the interest only period ends, your estimated repayments will be

(including extra )

Total loan repayments:

Total interest payable:

Compare car loans

By making extra monthly repayments of

Your loan term could reduce by:

You could pay less interest, saving:

see as a table

Years remaining	Principal remaining

Calculator Assumptions: The above calculations are worked out assuming you’re paying off a principal and interest loan where the interest rate remains the same over the life of the loan. The repayment amounts do not take into account any additional fees or charges that may be charged to your loan (e.g. application fees).
Disclaimer: Whilst every effort has been made to ensure the accuracy of this calculator, the results should be used as indication only. They are neither a quote nor a pre-qualification for a loan.

More questions about getting used a car loan

• What are the interest rates on used car loans?

  Interest rates on used car finance varies widely depending on the age and condition of your car, how much it costs, the length of the loan, and your own credit history.

  Used car loans rates range from around 5.66% p.a. all the way up to 21.78% p.a. (comparison rate). And it all depends on the factors outlined above.

• Which bank or lender has the best used car loans?

  There really is no single best used car loan because every borrower (and every car) is different. The best loan will always have a competitive rate and minimal fees, and suit the type of car you're buying.

  This means you need to compare multiple car loans to find a better deal. And while many smaller online lenders often have very low rates, it's worth looking at bigger banks too. The car loan market is quite competitive across the board.

• 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.

• Can I get a used car loan if I've previously declared bankruptcy?

  Some lenders are open to considering a person who has previously petitioned for bankruptcy. Check out our loans for bankrupts guide.

• Can I get a used car loan as a student?

  If you need to buy a car and you're a student, see if you're eligible by visiting our student car loans page.

• Can I get a used car loan if I'm self-employed?

  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.

• Can I have a balloon payment on a used car loan?

  Yes, many lenders allow balloon payments on used car loans to help reduce your regular monthly repayments. You will be required to pay the agreed lump sum at the end of the loan term and this option is often restricted to vehicles that are less than ten years old.

• Are interest rates higher for used car loans compared to new car loans?

  Yes, interest rates for used car loans are generally higher than those for new car loans. Lenders consider older vehicles to be higher risk assets because their resale value is less certain and they are more prone to mechanical issues which could affect the security of the loan.

• Is there a maximum age for a car to be eligible for a secured used car loan?

  Yes, most Australian lenders cap the age of a car for a secured used car loan at 6 to 8 years old by the time the loan term finishes, though RACV accepts cars up to 20 years old and OurMoneyMarket has no age limit. If you're buying a classic car or a vehicle that exceeds these age limits, you may need to apply for an unsecured personal loan instead.

• Do I need to pay a deposit for a used car loan?

  No, you do not always need a deposit as many lenders offer 100% financing for used car purchases in Australia. While providing a deposit is not mandatory, doing so can reduce your total loan amount and potentially help you secure a more favourable interest rate.

• What specific documents are required for a private sale used car loan?

  You must provide a tax invoice or bill of sale from the private seller along with the vehicle's registration papers and engine number. Most lenders will also perform a Personal Property Securities Register (PPSR) check to ensure the car has no outstanding debt and has not been stolen.

• Can I get a used car loan while on a Centrelink pension?

  Yes, some specialist lenders consider Centrelink payments as a valid source of income for used car loan applications. You will generally need to prove that you have additional stable income or that your pension payments are sufficient to cover the loan repayments and your daily living expenses.

• Is a pre-purchase inspection mandatory for a used car loan?

  No, a professional mechanical inspection is not usually a mandatory requirement for loan approval but it is highly recommended for your protection. Some lenders may require a basic valuation or an inspection specifically for private sales to confirm the condition and market value of the vehicle before they release the funds.

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To make sure you get accurate and helpful information, this guide has been edited by Richard Whitten as part of our fact-checking process.

Written by

Rebecca Pike

Editor, Money

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Rebecca Pike is Finder’s money editor, with over 7 years of experience in mortgages and personal finance. A frequent TV and radio commentator, she frequently appears on Sunrise and 7News, Today and 9News, as well as Sky News, Channel 10 and across radio and print. Rebecca previously served as Editor of Mortgage Professional Australia. She has a Master’s degree in Journalism as well as ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products, which comply with ASIC guidelines. See full bio

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