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How much should you spend on a new car?

Learn the effective rule for buying cars in your price range.

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

The amount you should spend a new car largely comes down to your personal situation and tastes. The only wrong answer is anything over 100% of your income, but we're going to say the right answer is 10-15% of your annual income in most cases and anywhere from 15-30% of your income if you're a car enthusiast or get a lot of use and enjoyment out of your car.

Why 10-15%?

  • For most income brackets there are cars for sale at this price. By following this rule you can be more confident that you've found an affordable option.
  • If you're using a loan to buy a car, sticking to this rule can stop you from wasting money by borrowing more than you need.
  • Between insurance, petrol, maintenance and repairs, the ongoing costs of owning a car add up quickly. This leaves you a buffer to afford these.
  • Sticking to this price range rather than going higher may help you to avoid rental plans and save considerable amounts of money in the long run.
  • Car value can depreciate rapidly. Think of your car as a useful tool, not as an investment.

How much should I spend on a new car by salary

By deciding ahead of time that you will not spend more than 15% of your yearly income on a car, you will have a clear price in mind.

Annual incomeHow much you should spend on a car (15%)
$20,000$3,000
$40,000$6,000
$60,000$9,000
$80,000$12,000
$100,000$15,000
$150,000$22,500
$200,000$30,000

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Buying a car for under $3,000

  • At any given time, there are thousands of used cars being sold for under $3,000 in Australia. Check eBay, GumTree, the local classifieds, used car dealerships and online auctions.
  • Know what to look for in a used car. By following a checklist and knowing what to be aware of, you can avoid traps and pitfalls.
  • Consider financing rather than renting if it can help you get a more reliable or efficient vehicle, or if you're caught short and urgently need a new car to get to work. Specialised used car loans let you borrow as little as $1,000 with fixed interest rates starting at 5.69% p.a.
  • You may not want comprehensive car insurance for a vehicle under $3,000, even if you're the kind of person who gives your car a name and emotionally bonds with it. Consider sticking to third party property damage only. This is one of the cheapest types of car insurance, but it still offers important protection in the form of $20 million of legal liability cover.

Buying a car for under $15,000

  • You can find recent-model used cars online for $10,000 or less.
  • Car loans are available for higher amounts, but you'll be awarded with a cheaper rate if you can use your car as security.
  • Vehicle auctions are popular among car dealers. This is where a lot of them go to pick up a bargain for resale at a higher price. Learn about car auction etiquette and you can beat them to the punch, picking up ex-fleet and government vehicles at a fraction of their value.
  • You might be able to save money by opting for a more recent or popular model, even if it costs a little bit more. The availability of spare parts can keep repair, maintenance and car insurance costs down.
  • Comprehensive car insurance may not deliver value for money in this price range. Consider third party property damage insurance for important but inexpensive cover, or third party fire and theft insurance, which covers legal liability as well as theft and fire damage, while still being relatively affordable.

Buying a car for $15,000 or more

  • Used vehicles can be a good choice for various car types, including those in higher price ranges. Look around and you might find current-model cars in almost pristine condition for half of what they would cost brand new.
  • Vehicles in this price range and above can be loaded with additional features and electronics. If you want to save money, look for the features that deliver value and safety, rather than the luxuries, cosmetic features or conveniences.
  • If you're planning on financing your vehicle, it's usually worth using your car as security when taking out a higher loan amount. Used cars can still be used as security, but you might find that new car loans have a cheaper rate.
  • If you want to get a lot of use out of your car and plan on treating it like your own child, comprehensive car insurance can deliver a high level of protection.
  • If you're choosing a car that's loaded with electronics and advanced systems, remember that comprehensive car insurance will typically be needed to cover them. This is considerably more expensive than third party only car insurance, but also more useful. Compare a number of different policies to find the right cover for your car.

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I'll need to borrow money. What are my car financing options?

Before you start comparing car loans, it helps to know what you're working with. This repayment calculator lets you compare loans by how much they will actually cost you all up, in real money. Simply fill in the loan amount, the loan term, the interest rate and the repayment frequency to see how much different loans actually cost, in real terms.

How to find a car loan that works for you

To find the right car loan, try following the guides below. Remember that everyone's financial situation is different and that you should compare all options critically before deciding on one loan. The following are just suggested guides and may not be right for everyone.

You can use this guide for low rate car loans or this one for used car loans as a baseline for new or used car financing.

Compare a range of car loans

1 - 14 of 14
$
Name Product Mobile details underline Interest Rate (p.a.) Comp. Rate (p.a.) Rate Type Application Fee Monthly Fee Monthly Repayment
IMB New Car Loan Fixed, 1 - 7 Years, $2,000 - $75,000
IMB New Car Loan
1 - 7 Years, $2,000 - $75,000
4.88%
5.23%
Fixed
$275.12
$0
You'll receive a fixed rate of 4.88% p.a.
A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one that's up to two years old.
Wisr Secured Car Loan Fixed, 3 - 7 Years, $5,000 - $79,000
Wisr Secured Car Loan
3 - 7 Years, $5,000 - $79,000
5.59%
to 13.24%
6.42%
to 12.12%
Fixed
$605
$0
You'll receive a personalised interest rate from 5.59% p.a. to 13.24% p.a. based on your risk profile
A flexible car loan from $5,000 - $79,000 with personalised rates and rewards for strong credit customers.
loans.com.au - New - Prime Special (Variable) Variable, 3 - 5 Years, $5,000 - $100,000
loans.com.au - New - Prime Special (Variable)
3 - 5 Years, $5,000 - $100,000
3.74%
4.28%
Variable
$400
$0
You'll receive a variable rate of 3.74% p.a. based on your risk profile
Finance a new car and benefit from features such as fast approval, no ongoing fees.

Credit Concierge Car Loan - Prime (Credit Score 800+) Fixed, 1 - 7 Years, $10,000 - $150,000
Credit Concierge Car Loan - Prime (Credit Score 800+)
1 - 7 Years, $10,000 - $150,000
3.99%
to 5.99%
4.93%
to 6.93%
Fixed
$395
$5.50
You'll receive a fixed rate of 3.99% p.a. with a comparison rate of 4.93% p.a.
Must have a high credit score and excellent previous repayment history to qualify. Home ownership or mortgage may assist overcoming a lower credit score in some instances. Lenders individual credit criteria applies and approval is not guaranteed nor is the interest rate finalised until a formal submission for finance is made.
RACV New Car Loans Fixed, 1 - 7 Years, $5,000 - $150,000
RACV New Car Loans
1 - 7 Years, $5,000 - $150,000
5.99%
6.68%
Fixed
$499
$0
You'll receive a fixed rate from 5.99% 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.
NRMA New Car Loan Fixed, 1 - 7 Years, $5,000 - $130,000
NRMA New Car Loan
1 - 7 Years, $5,000 - $130,000
5.99%
6.68%
Fixed
$499
$0
You'll receive a fixed rate from 5.99% p.a.
Purchase a new or used car up to 3 years old and benefit from a fixed rate and no monthly fees. Pre-approval available within 5 business hours.
Stratton Finance New Car Loan Fixed, 1 - 7 Years, $10,000 - $300,000
Stratton Finance New Car Loan
1 - 7 Years, $10,000 - $300,000
4.44%
to 18%
5.76%
to 19.61%
Fixed
$482
$8.90
You'll receive a fixed rate from 4.44% p.a. depending on the lender you are approved with.
Apply for up to $300,000 and use cash or trade in a vehicle to use as a deposit. Optional balloon payment available.
OurMoneyMarket Car Loan Fixed, 1 - 7 Years, $2,001 - $75,000
OurMoneyMarket Car Loan
1 - 7 Years, $2,001 - $75,000
5.85%
to 14.99%
6.47%
to 21.14%
Fixed
1.5% - 6%
min. $250
$0
You'll receive a fixed interest rate from 5.85% p.a. to p.a. based on your risk profile.
Borrow between $2,001 and $75,000 to finance a new or used car up to 7 years.
loans.com.au - New - Prime Special (Fixed) Fixed, 3 - 5 Years, $5,000 - $100,000
loans.com.au - New - Prime Special (Fixed)
3 - 5 Years, $5,000 - $100,000
5.09%
5.64%
Fixed
$400
$0
You'll receive a fixed rate of 5.09% p.a. based on your risk profile
Finance a new car and benefit from features such as fast approval, no ongoing fees and an optional balloon payment.

Great Southern Bank Fixed Rate Car Loan Fixed, 1 - 7 Years, $5,000 - $100,000
Great Southern Bank Fixed Rate Car Loan
1 - 7 Years, $5,000 - $100,000
6.79%
7.16%
Fixed
$265
$0
You'll receive a fixed rate of 6.79% p.a.
A secured loan with a high maximum borrowing amount up to $100,000. Redraw facility and no monthly fees.
loans.com.au - Used Car Loan (6+ years) Variable, 3 - 5 Years, $5,000 - $100,000
loans.com.au - Used Car Loan (6+ years)
3 - 5 Years, $5,000 - $100,000
5.04%
5.59%
Variable
$400
$0
You'll get a variable rate of 5.04% p.a.
Borrow up to $100,000 for a used car for 6+ years, with no monthly fee.

Credit Concierge Car Loan - Mid Prime (Credit Score 500-800) Fixed, 1 - 7 Years, $10,000 - $150,000
Credit Concierge Car Loan - Mid Prime (Credit Score 500-800)
1 - 7 Years, $10,000 - $150,000
5.89%
to 12.89%
6.99%
to 13.99%
Fixed
$350
$8.50
You'll receive a fixed rate of 5.89% p.a. with a comparison rate of 6.99% p.a.
Must have an above average credit score and no defaults or late payments in the last 6 months. Home ownership or mortgage may assist overcoming a lower credit score in some instances. Lenders individual credit criteria applies and approval is not guaranteed nor is the interest rate finalised until a formal submission for finance is made.
loans.com.au - Used Car Loan (8+ years) Variable, 3 - 5 Years, $5,000 - $50,000
loans.com.au - Used Car Loan (8+ years)
3 - 5 Years, $5,000 - $50,000
8.94%
9.51%
Variable
$400
$0
You'll get a variable rate of 8.94% p.a.
Borrow up to $50,000 for a used car for 8+ years, with no monthly fee.

Credit Concierge Car Loan - Sub Prime (Credit Score Below 500) Fixed, 1 - 7 Years, $10,000 - $150,000
Credit Concierge Car Loan - Sub Prime (Credit Score Below 500)
1 - 7 Years, $10,000 - $150,000
14.99%
to 24.99%
17.99%
to 27.99%
Fixed
$350
$8.50
You'll receive a fixed rate of 14.99% p.a. with a comparison rate of 17.99% p.a.
Must have stable employment longer than 3 months with no recent missed payments or overdrawn bank accounts. Defaults are assessed on individual circumstances and amounts on credit file must be paid or under arrangement. Good savings history may assist overcoming a low credit score and any unpaid defaults in some instances. Lenders individual credit criteria applies and approval is not guaranteed nor is the interest rate finalised until a formal submission for finance is made.
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Car Loan Offers

Important Information*
Logo for IMB New Car Loan
IMB New Car Loan

You'll receive a fixed rate of 4.88% p.a.
A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one up to two years old.

Logo for Beyond Bank Low Rate Car Loan "Special Offer"
Beyond Bank Low Rate Car Loan "Special Offer"

You'll receive a fixed rate of 4.69% p.a.
Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.

Logo for RACV New Car Loans
RACV New Car Loans

You'll receive a fixed rate from 5.99% 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.

Logo for NRMA New Car Loan
NRMA New Car Loan

You'll receive a fixed rate of 5.99% p.a.
Purchase a new or used car up to 2 years old and benefit from a fixed rate and no monthly fees. Pre-approval available within 5 business hours.

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