What type of car can I get with a car loan?

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

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Car financing, while convenient, can be tricky if you’ve never had a car loan before. Lenders usually have a minimum age requirement for the vehicle as well as a minimum value to be approved for a car loan. 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 type of car do you want a car loan for?

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. But some lenders, such as Westpac, allow you to borrow up to a certain percentage extra of the car's value to cover these costs. 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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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 4.99% 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 4.99% 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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