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You won't be charged for clicking through to one of our car finance partners. We get paid out of their pocket – not yours.
We're here to help
We've helped thousands of Australians find a car loan by keeping things simple and free of complicated jargon.
It's quick and easy to use
Our side-by-side car loan comparison makes it easy to find a car loan that is a good fit.
What are the steps in getting a car loan?
Car loans can work differently depending on what type of loan you take out and what kind of car you're looking to purchase.
Generally, the following steps will apply:
You apply for finance Once you've compared car loans and chosen the lender and car finance, you need to submit your application. You can do this in person at the bank or dealership or do it online. Unsecured car loans will only require your personal and financial details, but secured car loans will also need information about the car.
Credit officer reviews your application Loan approvals can happen on the same day or they may take up to 10 days. You may also be able to receive conditional approval, where you will be told how much you are likely to be eligible for so you can go car shopping knowing how much you can spend.
Ensure you've provided the right documentation The lender may need additional documentation such as identification, income verification or bank statements to support your application.
Sign loan documents This is your agreement with the bank to repay the amount you're borrowing over a specified loan term at an agreed interest rate.
Purchase your car using the funds This can happen in a few different ways. If you're buying a car in a private sale, your lender may be able to pay the seller directly or give you a cheque to pay for it yourself. If you're purchasing from a dealership, the lender will usually pay the dealer directly. Unsecured loans will require you to arrange the payment yourself.
What type of car are you looking for?
The type and age of the car you want will influence which loans you may be eligible for. If you're after a new, used or older car, find out how this can affect your options below.
New cars
Newer cars are deemed to be a lower risk and so you may be able to receive more competitive interest rates if you want to purchase a new car. The vehicle is likely to retain most of its value for the majority of the loan term, and because it is used as collateral security, it's in the lender's best interests if the car has a chance of selling for a good price.
Lenders may consider any car under 2 years old to still be a new car, so be sure to check the terms and conditions of several loans. It may also be dependent on the number of kilometres displayed on the odometer.
You can still get a secured loan if you want to buy a used car, but watch out for restrictions on the age of the car. Interest rates tend to be a little higher on these types of used car loans, which means if you're looking to purchase a used car, it's even more important to do a car loan comparison.
If the car you want to purchase is more than 5 years old, the bank may be unlikely to use your vehicle as security for the loan as its value may not be retained. Instead, the lender may suggest you apply for an unsecured personal loan. If the car is not used as security, the lender can't repossess the vehicle if you stop making your repayments, so this type of loan is considered riskier and interest rates can be higher.
A variable rate car loan will mean the interest rate you pay on your loan amount will change according to the market. If interest rates go up, it's likely your repayments will also go up to cover the additional interest charges. If rates go down, your repayments should also be reduced. A variable loan can be quite flexible, but it can also be harder to budget for repayments if they begin to vary from month to month.
Fixed rate car loan
A fixed rate car loan lets you lock in the interest rate for the duration of the loan. As the interest rate doesn't change over the loan term, your repayments will also stay exactly the same. This makes it much easier to budget for repayments each month. However, the fixed rates available from most lenders tend to be higher than the variable rates available.
Secured car loan
With a secured loan, the vehicle you buy is used as collateral for the loan. The lender has the right to repossess your vehicle if you default on your loan. It will then sell the vehicle to recoup the costs of the loan.
As this type of loan is less of a risk to the lender, the rates for secured loans will usually be lower than those on an unsecured loan. This type of loan is similar to a secured personal loan; however, its intended use is for the purchase of a vehicle.
Unsecured car loan
With unsecured loans, the lender doesn't use any of your assets as security for the loan. This means it has no asset to repossess if you stop making your loan repayments. These loans come with higher interest rates, but you also have more flexibility with the way you use your loan.
6 things to look for when doing a car loan comparison
Interest rate. This will determine how much your repayments are, so compare lenders to get the best rate.
Loan term. The length of your loan will also impact your repayments. Longer term loans will have smaller repayments but will take longer to pay off and you’ll pay more in interest. Also look out for "balloon payments", with one larger repayment at the end of the term.
Minimum repayments. Ask what your minimum repayment amounts will be and check that this is affordable on your income and budget.
Repayment structure. Check how often you need to make repayments, how you make them and if you're able to make extra repayments or repay your loan early without penalty.
Fees. Some loans come with monthly account fees or administration fees, establishment fees or early repayment fees.
Car insurance. Some lenders may insist the vehicle is properly insured at all times until the loan is fully repaid. If this is the case, compare your car insurance options. Not only can you save hundreds of dollars, but you might find that the best car insurance for your situation isn't necessarily the cheapest.
What to consider before applying for a car loan
How much you can afford to borrow.
Do this before you start looking for a loan or searching for your dream car. Go through your finances, look at your income and outgoings and check the maximum amount you can afford in monthly repayments.
Work out what terms you want from the loan.
You should also consider the length of the loan term before you start searching around for a lender or a car. The longer the repayment term, the lower the repayments, but the more the loan will cost you overall in interest payments.
Extra costs.
You need to think about additional costs associated with buying a new car and determine whether this is something you want to work into the car loan or whether you want to pay for this separately. This includes the cost of insurance, which can be quite high – particularly for younger drivers with less experience.
Pros and cons of applying for an online car loan
Quick process. Most lenders will come to a decision on the same day you apply and, in many cases, you can get funds disbursed in as little as one day.
Bargaining power. Since just about every individual needs a car, competition among lenders is fierce. This results in better bargaining power for consumers.
Convenience. Applying for a car loan online is simply much more convenient than having to apply in-person at a dealership or bank.
Applying too many times.Lenders may deny your application if they see you’ve been applying for too many loans within a short period of time. Doing this also lowers your credit score.
Credit history. Red flags in your credit history, such as missed or late payments, will hurt your chances of being approved.
When the cheapest interest rate isn't the cheapest loan
When most people go hunting for the cheapest loan, they immediately look for a low interest rate car loan and believe they're getting the best car loan. Unfortunately, it is possible for the car loan with the cheapest rate to end up costing you more over the term of the loan if you're not careful.
Car loan comparison: How the cheapest rate could cost you more
Consider a car that costs $25,000. One lender is offering a rate of 8% p.a. over 5 years and another is offering a rate of 9% p.a. The only difference is the fees. Take a look at how much it could cost you by just opting for the cheapest car loan rate:
Lender A
Lender B
Loan amount
$25,000
$25,000
Car loan rates
8% p.a.
9% p.a.
Loan term
5 years
5 years
Monthly account fee
$20
$0
Establishment fee
$0
$200
Total monthly cost
$532.91
$518.96
Total repayment amount
$32,275
$31,588
In the above example, the interest rate that was higher turned out to be the cheaper option, despite the initial up-front cost.
Make sure you consider and compare all costs before you apply for a loan and use a car loan repayment calculator to determine your repayments.
How to get a lower interest rate
Be aware of interest rates in the market
If you take the time to compare car loans here on Finder, you'll get an idea of what interest rates are available from a range of lenders, giving you plenty of ammunition when negotiating with your own lender.
Negotiate on price
If you're keen to stay with your bank or credit union for your car finance, take your interest rate research with you and ask if you can get a discount on the interest rate they offer you.
Take out car dealership finance
When you apply for a loan through the finance officer at a car dealership, you have lots of room to negotiate rates. This is because the dealership often receives its loans at discounted rates, and the margin between what the dealer pays to the lender and what you pay to the dealer forms their "trail" commission. In other words, every time you make a payment, some of it goes towards paying interest to the lender, and some goes to paying commission to the car dealership. Haggle: you may save up to 2% off advertised rates.
Ask for a package deal
Some banks will offer a discount on their advertised interest rates if you also have other banking products with them. If you already have a mortgage and credit card with one bank, ask if it will give you a discount on your car loan if you add that to your package?
Ways to reduce your monthly car loan repayments
Lower the interest rate
By reducing your interest rate even a little, you should end up paying less on your monthly payments. This is one of the primary reasons why you should always take the time to check comparison sites before you apply for any type of finance.
Borrow less
Borrowing $5,000 more over a 5-year loan term adds up to $1,000 extra per year you have to pay back, plus interest. This adds up to approximately $90 per month out of your pocket. You can reduce the amount you need to borrow by offering a trade-in of your old vehicle or even paying a slightly larger deposit out of your savings.
Consider a residual balloon payment
If you borrow $30,000 and leave a $10,000 residual balloon payment to be paid at the end of the loan term, your repayments will be calculated based on the $20,000 to be repaid, plus interest on the entire $30,000. You'll need to cover this cost at the end of the term or refinance your car with the lender.
Opt for a longer loan term
When you choose a longer loan term, the amount you're required to pay each month is reduced. Unfortunately, the lender also gets to charge you interest on your debt for a longer period, so you could end up paying far more in interest over the loan term.
Car loan comparison: Loan terms for a $25,000 vehicle
Option 1
Option 2
Loan amount
$25,000
$25,000
Car loan rate
8.25% p.a.
8.25% p.a.
Loan term
5 years
7 years
Monthly repayment
$509.91
$392.78
Total repayment amount
$30,594.38
$32,993.22
In this example, Option 1 has a higher monthly repayment, but you only end up paying $5,594.38 in interest over the term of that loan. By comparison, Option 2 allows you to pay $117.13 less per month on your monthly repayments. This will definitely make budgeting easier throughout the loan term, but you end up paying $7,993.22 in interest over the loan term. This is $2,398.84 more in interest charges you end up paying overall.
What you'll need to apply
Below is a checklist of some of the information and documentation you may need to supply for your car loan application.
Identification
Driver's licence
Passport
Birth certificate
Medicare card may be required as additional documentation
Income and employment
3 recent payslips
2 years of tax returns (if self-employed)
Your after-tax income
Employment information and employer's contact details
Assets and liabilities
Details of properties or large assets (such as a car) you own
Your ongoing expenses
Credit card or store card limits
Details of loans or overdrafts
Vehicle details
Make, model, year and colour
Identification number (VIN) or chassis number
Engine number
Registration number
Purchase price
*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.
Questions you may have about car loans
If you still haven't found the information you're looking for, we're confident you'll find it below.
Yes, if you meet the eligibility requirements. As long as you are older than 18, you're a permanent resident of Australia and you can verify that you earn a steady income, you may qualify.
The amount you're able to borrow for a car loan is determined by your income and current liabilities as well as the specific loan you apply for. There may also be minimum loan amounts set by individual lenders. Lenders usually offer between $5,000 and $80,000 if the loan is secured.
Yes. Pre-approval for a car loan is a great way to work out how much you can comfortably borrow and what your repayments will be before you head out car shopping.
Some lenders will allow you to include your car insurance premium and other costs associated with the purchase in your loan amount. Always ask to be sure this applies to your loan type.
Some lenders will place restrictions on a vehicle's age and even some restrictions on some car makes and models. If you have any doubts about the car you want to buy, take the time to ask your lender some questions about whether it can be used as security for your loan.
Some lenders will allow you to borrow the entire purchase price of your car. This will depend heavily on the strength of your financial situation and your credit history.
Your repayments can be made automatically via direct debit on a weekly, fortnightly or monthly basis with most lenders. This is where a specific amount is debited from your regular transaction account each month to cover your payment. Some lenders will also allow you to make your payments via BPAY if you prefer.
This will depend entirely on the lender you choose and the type of loan you want. Some loans will charge you an early repayment fee for making extra repayments while others won't. It's always a good idea to check whether an early repayment fee will apply to your car loan before you proceed with the application.
Most lenders will allow you to make additional repayments in a variety of ways. You can choose to make a payment directly into your loan account using BPAY, transfer funds electronically from your regular transaction account over to your loan account or nominate to have each payment taken out at an agreed amount as part of your direct debit agreement. For example, if your minimum repayment is $387.50 per month, you might nominate to have your direct debit payments set to pay $400 per month instead.
Interest is calculated on your outstanding loan balance on a daily basis and charged to your account monthly in arrears.
You can buy your car through a private seller if you wish. You will need to provide details about the car to the lender, such as the registration number and vehicle identification number (VIN) for the loan to proceed.
Any enquiries you make for any form of credit will be entered onto your credit report as an enquiry with that lender. If your application is declined and you end up submitting another application elsewhere, your report will show 2 enquiries. Our guide to car loan credit checks explains this further.
Many banks may decline a loan application from a borrower with a bad credit history. However, there are some lenders out there willing to let you borrow money even with bad credit. You may want to discuss your application with a car finance specialist before you proceed. This will help you to locate the appropriate lenders to help with your situation and improve your chances of getting your loan approved. These loans will generally be secured against the car in case of default.
A balloon payment is a residual amount of money that needs to be repaid at the end of the loan term. This type of loan lets you reduce your monthly repayments throughout the term of the loan, then you need to pay off the lump-sum amount still owing at the end. You might choose to sell the car to pay off the lump-sum amount due or trade it in on another vehicle and refinance that residual amount into your new loan. You can read more about balloon payments on car loans in our guide.
In the event that you stop making your car loan repayments, the lender may choose to repossess your car. It will sell it in an attempt to recoup some of its money along with covering any repossession fees they were charged. If the sale price of the car doesn't fully cover those costs or pay off your outstanding loan amount, you may still need to repay the outstanding balance.
Yes, you are. You have the right to cancel a contract within 3 clear days after you’ve signed the contract unless you are responsible for the car’s delivery within this time.
It’s important to know whether you can cancel your contract through the cooling-off period. Once you know that you can do this, fax a letter to the vehicle trader explaining that you would like to break the contract through the cooling-off period. Keep a copy of it and ask for proof that the company received it within 3 days of you signing the contract.
Some car traders do not allow you to have cooling-off rights. This is important to know before you try and break the contract through the cooling-off period.
Yes, there are. If you purchase a used car in Queensland, there is a cooling-off period of 1 day but there are no cooling-off periods for new vehicles. In New South Wales, there is a cooling-off period for new cars of 1 day that finishes at 5pm on the next business day. This does not apply to motorcycle purchases. In Western Australia, there are no cooling-off periods for any vehicle contracts, but you can break the contract before the dealer has informed you that the contract has been accepted.
Elizabeth Barry is the lead editor for Finder. She has over 10 years' experience writing about a range of topics with a focus on personal finance. You’ll find her writing and commentary in a range of publications and media including Seven News, the ABC, MSN, the Irish Times and Singapore Business Review.
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