What kind of car can I finance?

Know the possibilities and restrictions when it comes to financing your car.

Car financing, while convenient, can be tricky if you’ve never had a vehicle loan before. The minimum eligibility lenders have in place can vary greatly. This guide will outline the general criteria that lenders have in place for vehicles you may be looking to finance.

Why is there eligibility criteria for my car?

Car loans come with lower rates than unsecured loans because lenders have the right to sell your vehicle if you default on the loan. To make sure that they will be able to cover the full amount of the loan, they need to check the vehicle to ensure it’s of a certain value; enough to cover their losses. To do this they require various documents or have strict minimum criteria in place.

What kind of car do you want to finance?

Here are some criteria that lenders use to decide whether or not to approve you for a car loan.

  • An older vehicle or a used car.
    Lenders have restrictions on how old a vehicle can be if you are looking to use it as security for the loan. Generally, for a car to be considered “new”, it will need to be less than two years old. A used car will need to be less than seven years old, although some lenders will allow you to finance cars up to 12 years old. You can take a look at some of the used car loan criteria outlined here.
  • A motorbike.
    Some lenders treat a motorbike the same way as a car and will allow you to use it as a guarantee for a car loan. Other lenders only let you use it as security for a specialised motorbike loan or for a standard secured loan. You can find finance for new and used motorbikes; just take a look at the criteria before you apply.
  • A car as well as add-ons, such as rego.
    There are specific criteria that come with secured loan amounts, so applying for a loan that’s more than the cost of the vehicle may not be possible. If this is something that you want to do, take a look at the terms before submitting your application and also think about the affordability of the repayments.
  • A car for business purposes.
    If the car you’re purchasing will be used for business, whether you’re a sole trader or even part of a company, you have additional financing options to consider. A novated lease can offer you a tax-free way to salary sacrifice your car loan repayments. A chattel mortgage or car hire purchase are other options to consider if you’re self-employed.
  • An imported vehicle.
    Buying a car overseas and importing it to Australia brings with it a host of additional costs. If it’s a luxury car, you may need to factor in the luxury car tax (LCT). There’s also customs fees, shipping costs and the costs of transferring your payment. If you’re looking for a loan to cover all of these costs, you’ll need to ensure the loan will cover all of these costs before you apply. You can also consider applying for an unsecured loan instead.
  • A car from a dealership or private sale.
    Buying a car from a dealership opens up additional financing options, namely dealership finance. You’ll typically be offered a low interest rate with a balloon payment at the end of the term. If you’re keen on a car from a dealership but want to opt for a car loan, you can choose a lender with pre-approval to give you bargaining power at the dealership. There are additional considerations with a private sale – ensure you get all the documentation needed from the seller to be approved for the loan you’re considering. Also, check if private sales are not considered by the lender or if the age/odometer reading makes it ineligible.

Dealership finance or a car loan? How to find the right choice for you

Understanding the kind of car you can finance is the first step to finding the right loan. Make sure you compare your options before applying for your car loan so that you get the best option for you.

Picture: Shutterstock

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Stratton Finance New Car Loan

Apply for up to $100,000 and have up to 10 year(s) to repay. You can use cash or trade in a vehicle to use as a deposit.

IMB New Car Loan

Borrow up to $75,000 for a new car up to two years old. Competitive 5.99% p.a. rate available to all approved applicants.

Beyond Bank Low Rate Car Loan "Special Offer"

Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.

RACV New Car Loans

A competitive rate car loan from RACV with no monthly fees and 5-hour loan approval.

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