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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 offered secured car loans for cars that are less than 7 years old. Some lenders accept cars up to 12 years old. 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
Value. You can get a used car for a cheaper price than a similar, brand-new vehicle. Let someone else pay for the first few years' depreciation (according to RACQ, it could be as much as $299.12 per week).
Avoid salespeople. Buying a used car means avoiding professional salespeople using high-pressure selling strategies. Buying privately means you don't have to pay the extra that a dealer puts on top.
No wait. There's often a long wait for new cars. Sometimes the dealer only has a display model and you have to wait weeks or months for your car to be built and shipped.
More options. Buying second-hand means you have more options, and can possibly get a higher-end model than you would if buying brand new.
Insurance. A lower value can mean lower car insurance costs.
Cons
You need to do more research. Buying used, there's a chance you end up buying a car that's in worse shape than it looks. You really need to take a good look at the car, and spend time researching online. A test drive is also essential.
Out of warranty. Depending on the age of the car you're buying, you might miss out on warranty protections.
Paperwork. Certain used vehicles might need a roadworthiness certificate or safety inspection.
Tighter financing conditions. It is harder to get a used car loan compared to a loan on a new car. But this really depends on the age and condition of the vehicle. You may just need to shop around a bit more for a suitable car loan, or accept a slightly higher interest rate.
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
$
%
$
Overview of your loan
Once the interest only period ends, your estimated repayments will be
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
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% all the way up to 20%. And it all depends on the factors outlined above.
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.
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.
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.
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.
Some lenders are open to considering a person who has previously petitioned for bankruptcy. Check out our loans for bankrupts guide.
If you need to buy a car and you're a student, see if you're eligible by visiting our student car loans page.
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.
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.
Yes, most Australian lenders require a car to be no more than 10 to 12 years old by the time the loan term finishes. If you are buying a classic car or a vehicle that exceeds these age limits, you may need to apply for an unsecured personal loan instead.
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.
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.
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.
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.
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.
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I am looking to secure a $50,000 car loan. I have been told that you can pay off lump sums without penalties with some finance companies, but I am a little skeptical of this. Please clarify.
Regards.
Steve
Finder
JeniOctober 1, 2018Finder
Hi Steve,
Thank you for getting in touch with finder.
Repaying a car loan early without penalty is another common feature of variable rate car loans, however it is still best to check if you are able to make extra or lump sum repayments as well as if an early prepayment or early termination fee applies.
I hope this helps.
Please feel free to reach out to us if you have any other enquiries.
Thank you and have a wonderful day!
Cheers,
Jeni
JadeMarch 30, 2018
I’m currently bankrupt and have gained casual employment and need a car am I able to apply for a loan somehow
JoelMarch 30, 2018
Hi Jade,
Thanks for leaving a question on Finder.
You can get a loan if you are discharged bankrupt or even if you are currently bankrupt. You will be more limited in terms of the lenders you have to choose from, and the fees and rates will also be higher on bankrupt loans. You may also be required to attach an asset as security or apply with a guarantor. You may click the link above to find out about your loan options and see what you might be eligible for.
You may click the name of the lender to be redirected to our review page and learn more about the lender’s loan offer, rates, and requirements as well as the pros and cons of using their loan service. When you are ready, you may then click on the “Go to site” button if available and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
Cheers,
Joel
jj93February 7, 2018
I am a PhD student and am struggling to find a car loan as most places aren’t accepting of the scholarship as a wage – is there any places I should try applying for?
Finder
MayMarch 1, 2018Finder
Hi jj93,
Thanks for your inquiry.
When getting a car loan and you’re a student, it’ll be worth doing your homework on which lender would accept your form of income whether it be from casual work, permanent part-time work, or Centrelink payments. Not sure though for scholarship wages. Also when getting a student car loan, you may need to have a guarantor or co-borrower who can take on the legal and financial responsibility for the debt incurred with your car loan if you default or fail to make the repayments.
While we can’t recommend a specific lender to you and are not sure of your approval, you may like to check the guide on student car loans. On the page, is a comparison table you can use to see which lender suits you.
When you are ready, you may then click on the “Go to site” button and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
Cheers,
May
MichaelFebruary 7, 2018
Hi Im looking at purchasing a 1986 Van for work, I have owned and operated a company since 2012.
What is my most affordable options
AshFebruary 17, 2018
Hi Michael,
Thank you for reaching out to us.
If you are looking for a used Van, you may refer to the above list of lenders that offer used car loans. If you’ve chosen a brand and you think you are eligible, please click on the ‘Go to site’ button to be redirected to the lender’s official site and apply from there. Otherwise, some other car loans you may consider and compare are on these pages:
I would suggest that you review the features and details of the loan and the eligibility requirements and consider whether the loan is right for you. You can also contact the lender to discuss your options.
I hope this helps.
Please do not hesitate to reach out to us again if you have additional questions.
Cheers,
Ash
nurse31August 2, 2017
i want to borrow enough to paid off my existing car loan and buy two more cars one for me and one for my fiance . The two of us will be making the repayments
Finder
DeeAugust 3, 2017Finder
Hi there,
Thanks for your question.
If you are looking to borrow jointly to pay for your existing car loan and to have extra money, you may compare joint account personal loans and find the best one for you.
Want to buy a classic car but don't have the ready money? There are still financing options available for classic vehicles. Find out what loans you have to choose one and which one will work best for you.
If you've come to the end of your novated lease and you are left with a balloon payment, you might be wondering whether to refinance that into a personal loan or take on another novated lease.
If you're looking to purchase a business vehicle, this guide will take you through how a chattel mortgage works to help you decide if it's the right option for you.
BankSA offers a range of loans for your next car. If you're looking to finance a new or used car you can consider a secured or unsecured personal loan from BankSA, both with competitive rates. Compare and apply today.
If you're in the market for a range of loans, Gateway Bank might have an offering worth considering. You can use your car as security and get a lower rate with both new and used vehicles, so compare and apply today.
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I am looking to secure a $50,000 car loan. I have been told that you can pay off lump sums without penalties with some finance companies, but I am a little skeptical of this. Please clarify.
Regards.
Steve
Hi Steve,
Thank you for getting in touch with finder.
Repaying a car loan early without penalty is another common feature of variable rate car loans, however it is still best to check if you are able to make extra or lump sum repayments as well as if an early prepayment or early termination fee applies.
I hope this helps.
Please feel free to reach out to us if you have any other enquiries.
Thank you and have a wonderful day!
Cheers,
Jeni
I’m currently bankrupt and have gained casual employment and need a car am I able to apply for a loan somehow
Hi Jade,
Thanks for leaving a question on Finder.
You can get a loan if you are discharged bankrupt or even if you are currently bankrupt. You will be more limited in terms of the lenders you have to choose from, and the fees and rates will also be higher on bankrupt loans. You may also be required to attach an asset as security or apply with a guarantor. You may click the link above to find out about your loan options and see what you might be eligible for.
You may click the name of the lender to be redirected to our review page and learn more about the lender’s loan offer, rates, and requirements as well as the pros and cons of using their loan service. When you are ready, you may then click on the “Go to site” button if available and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
Cheers,
Joel
I am a PhD student and am struggling to find a car loan as most places aren’t accepting of the scholarship as a wage – is there any places I should try applying for?
Hi jj93,
Thanks for your inquiry.
When getting a car loan and you’re a student, it’ll be worth doing your homework on which lender would accept your form of income whether it be from casual work, permanent part-time work, or Centrelink payments. Not sure though for scholarship wages. Also when getting a student car loan, you may need to have a guarantor or co-borrower who can take on the legal and financial responsibility for the debt incurred with your car loan if you default or fail to make the repayments.
While we can’t recommend a specific lender to you and are not sure of your approval, you may like to check the guide on student car loans. On the page, is a comparison table you can use to see which lender suits you.
When you are ready, you may then click on the “Go to site” button and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
Cheers,
May
Hi Im looking at purchasing a 1986 Van for work, I have owned and operated a company since 2012.
What is my most affordable options
Hi Michael,
Thank you for reaching out to us.
If you are looking for a used Van, you may refer to the above list of lenders that offer used car loans. If you’ve chosen a brand and you think you are eligible, please click on the ‘Go to site’ button to be redirected to the lender’s official site and apply from there. Otherwise, some other car loans you may consider and compare are on these pages:
Best Car Loans
New Car Loans
Car Loans
Low-Interest Car Loans
I would suggest that you review the features and details of the loan and the eligibility requirements and consider whether the loan is right for you. You can also contact the lender to discuss your options.
I hope this helps.
Please do not hesitate to reach out to us again if you have additional questions.
Cheers,
Ash
i want to borrow enough to paid off my existing car loan and buy two more cars one for me and one for my fiance . The two of us will be making the repayments
Hi there,
Thanks for your question.
If you are looking to borrow jointly to pay for your existing car loan and to have extra money, you may compare joint account personal loans and find the best one for you.
Cheers,
Anndy