Driving away with debt: Australians shelling out $8 billion in car loans

24 January, 2019, Sydney, Australia – Aussies’ love affair with new cars is coming with an eye-popping price tag, according to new research by Finder, Australia’s most visited comparison site.

Finder analysis of Australian Bureau of Statistics (ABS) data found that $8.1 billion was lent against new cars in the past 12 months.

With the average new car loan interest rate around 6.3% and the average financed car selling for $36,139, Finder estimates $513 million will be paid in car loan interest in 2019.

ABS data shows that in the 12 months to November 2018, there were 1,175,908 new cars sold and 19% had car loans attached to them.

Graham Cooke, Insights Manager at Finder said Aussies are buying a new car every 27 seconds, and taking out a car loan every 2.5 minutes.

“It’s mind-blowing to think that more than $1.4 million in interest is paid back on these new cars every single day. That’s around the same value as 39 new cars,” he said.

Luckily for Australians, motor vehicles have been gradually declining in price when you consider inflation.

ABS inflation data shows that a motor vehicle that would have cost $20,000 in the year 2000 has come down in price by around 16% and would cost around $16,753 in 2018.

“Cars have been gradually getting cheaper, and improvements in technology mean Aussies are getting more bang for their buck.

“If you can’t pay for your ride upfront, a car loan can be a useful tool. Just remember that each optional extra you add will increase the overall price and the amount of interest you pay over time,” he said.

Cooke said a little research can go a long way toward an informed decision.

“Learn about the car loan rates available online before you go to buy and remember that in all financing matters, knowledge is power – use it to improve your personal situation,” he said.

Car loans for a $36,139 vehicle and monthly repayments over 5 years

Source: finder.com.au

Top tips for car loans

• Cheapest rate isn’t always the lowest cost. You may think a low interest rate car loan is the best deal, but it is possible for the cheaper rate to cost you more if the upfront or monthly fees are higher.
• Be aware of interest rates in the market. Take a few minutes and familiarise yourself with what interest rates are available from a range of lenders. This gives you a leg to stand on when you are ready to negotiate with your lender.
• Negotiate a price with the seller. If you're keen to stay with your own bank or credit union for your car finance, take your interest rate information with you when you make your enquiries and ask the lending officer if there is any room to reduce the rate they offer you.
• Borrow less. It sounds obvious, but if you can borrow even a little bit less on your loan, you won’t pay as much on your monthly repayments. Borrowing $5,000 over a 5-year loan term adds up to $1,000 per year extra you have to pay back. When you add the interest charged on that amount, this means approximately $100 per month out of your pocket.