Compare car loans Australia

Car Loan Finder® can help you find the right car loan for your needs.

Buying a car is the biggest financial decision you might make after buying a home. While the most popular way to do this is with a car loan, there are other options too, such as dealership finance and leasing.

Whichever way you choose, comparing your options could save you hundreds, if not thousands of dollars. Use Finder’s car loan comparison to help you sort through different loans by interest rates, fees and repayments.

How do car loans work?

Car loans can work differently depending on what type of loan you take out and what kind of car you're looking to purchase.

Generally, the following steps will apply:

1. You apply for finance
   Once you have compared car loans and chosen the lender and car finance product that you want to go with, you need to submit your application. This can be done in person at the bank or dealership, or online. Unsecured car loans will only require your personal and financial details, but secured car loans will also need information about the car.
2. Credit officer reviews your application
   Loan approvals can happen on the same day or they may take up to 10 days. You may also be able to receive conditional approval, where you will be told how much you are likely to be eligible for so you can go car shopping knowing how much you can spend.
3. Ensure you've provided the right documentation
   The lender may need additional documentation such as identification, income verification or bank statements to support your application.
4. Sign loan documents
   This is your agreement with the bank to repay the amount you're borrowing over a specified loan term at an agreed interest rate.
5. Purchase your car using the funds
   This can happen a few different ways. If you're buying a car in a private sale, your lender may be able to pay the seller directly or give you a cheque to pay for it yourself. If you're purchasing from a dealership, the lender will usually pay the dealer directly. Unsecured loans will require you to arrange the payment yourself.

What type of car are you looking for?

The type and age of the car you want will influence which loans you may be eligible for. If you're after a new, used or older car, find out how this can affect your options below.

New cars

Newer cars are deemed lower risk and so you may be able to receive more competitive interest rates if you want to purchase a new car. The vehicle is likely to retain most of its value for the majority of the loan term, and because it is used as collateral security, it's in the lender's best interests if the car has a chance of selling for a good price.

Lenders may consider any car under 2 years old to still be a new car, so be sure to compare several car loans’ terms and conditions to check: it may also be dependent on the number of kilometres displayed on the odometer.

New car loans

Used cars

You can still get a secured loan if you want to buy a used car, but you should watch out for restrictions on the age of the car. As it's likely the value of the car will reduce substantially from its original price over the loan term, the lender may consider this a higher risk than buying a new car. As a result, the interest rates tend to be a little higher on these types of used car loans. That means if you are looking to purchase a used car it may be even more important to do a car loan comparison.

Used car loans

Older cars

If the car you want to purchase is more than 5 years old, the bank may be unlikely to use your vehicle as security for the loan as its value may not be retained. In this event, the lender may suggest you apply for an unsecured personal loan instead. If the car is not used as security, the lender can't repossess the vehicle if you stop making your repayments. This type of loan is considered riskier for the lender and as a result, the interest rates will generally be higher.

Unsecured car loans

Compare car loan types

There is a wide variety of car financing options out there and there are features that differentiate those options.

Variable rate car loan

A variable rate car loan will mean the interest rate you pay on your loan amount will change according to the market. If interest rates go up it's likely your repayments will also go up to cover the additional interest charges. If rates go down your repayments should also be reduced. A variable car loan can be quite flexible, but it can also be harder to budget for repayments if they begin to vary from month to month.

Fixed rate car loan

A fixed rate car loan lets you lock in the interest rate for the duration of the loan. As the interest rate doesn't change over the loan term, your repayments will also stay exactly the same. This makes it much easier to budget for repayments each month. However, the fixed rates available from most lenders tend to be higher than the variable rates available.

Secured car loan

With a secured car loan, the vehicle you buy is used as collateral for the loan. The lender has the right to repossess your vehicle if you default on your loan. It will then sell the vehicle to recoup the costs of the loan.

As this type of loan is less of a risk to the lender, the rates for secured loans will usually be lower than those on an unsecured loan. This type of loan is similar to a secured personal loan, however their intended use is for the purchase of a vehicle.

Unsecured car loan

With unsecured car loans, the lender doesn't use any of your assets as security for the loan. This means it has no asset to repossess if you stop making your loan repayments. These loans come with higher interest rates but you also have more flexibility with the way you use your loan.

Chattel mortgage

If you're self-employed and purchasing a car primarily for business use, you can consider a chattel mortgage. The lender you apply with takes out a "mortgage" over your car while you make monthly payments towards the vehicle. Once it is paid in full, the mortgage is removed and you own the car outright. Don't forget the Australian Government $30,000 tax break, too.

Chattel mortgages operate like a regular secured personal loan in that the car you buy is still used as security over the chattel mortgage and you are still required to make regular monthly instalment payments off the principal balance.

Car hire purchase

Self-employed borrowers also have the option of financing a car using a car hire purchase. Every repayment made towards a car hire purchase agreement reduces the balance owing on the purchase price of the car. There are multiple cash flow and tax implications that may apply with different types of finance, so it's a good idea to discuss the different options which may be best suited to your business needs with your accountant.

Novated lease

A novated lease can be an option for employees who are able to make an arrangement with their employers. Essentially, the lender purchases the car and your employer takes the lease payments on the vehicle out of your before-tax salary. This can potentially help reduce your taxable income, which results in you paying less tax overall. At the end of the novated lease term, you have the option of purchasing the vehicle outright for an agreed sum or returning it and upgrading to a different car where you'll enter into a new lease agreement.

Car lease

For the self-employed, a car lease can also be used to buy a car for business purposes. The lender purchases the vehicle and you make regular lease payments until the end of the agreement. A commercial car lease may give you the option to purchase the car at the end of the lease term at a reduced price or you can choose to give the car back and enter into a new lease agreement for a different vehicle.

Car loan comparison: What to look for

• The interest rate. The rate you’re charged on your loan will play a part in how much your repayments are, so compare lenders to get the best rate.
• The loan term. The length of your loan will also impact your repayments. Take into consideration that longer term loans might have smaller repayments but will take longer to pay off and you’ll pay more in interest. Also look out for ‘balloon payments’, with one larger repayment at the end of the term.
• Minimum repayments. Ask what your minimum repayment amounts will be and check that this is affordable on your income and budget before you proceed.
• Repayment structure. Ask how often you need to make repayments, how you make them and check if you're able to make extra repayments or repay your loan early without penalty.
• Fees and charges. Some loans come with monthly account fees or administration fees, establishment fees, or early repayment fees.
• Car insurance. Some lenders may insist the vehicle is properly insured at all times until the loan is fully repaid. If this is the case, compare your car insurance options. Not only can you save hundreds of dollars, but you might find that the best car insurance for your situation isn't necessarily the cheapest.

When the cheapest interest rate isn't the cheapest loan

When most people go hunting for the cheapest loan, they immediately look for a low interest rate car loan and believe they're getting the best car loan. Unfortunately, it is possible for the car loan with the cheapest rate to end up costing you more over the term of the loan if you're not careful.

Comparison: How the cheapest rate could cost you more

Consider a car that costs $25,000. One lender is offering a rate of 8% p.a. over 5 years and another is offering a rate of 9% p.a. The only difference is the fees. Take a look at how much it could cost you by just opting for the cheapest rate:

In the above example, the interest rate that was higher turned out to be the cheaper option, despite the initial up-front cost.

Make sure you consider and compare all costs before you apply for a car loan and use a car loan repayment calculator to determine your repayments.

How to get a lower interest rate

• Be aware of interest rates in the market

  If you take the time to compare car loans here on Finder, you'll get a strong idea of what interest rates are available from a range of lenders. This gives you plenty of ammunition when it comes to negotiating with your own lender.

• See if you can negotiate a price

  If you're keen to stay with your own bank or credit union for your car finance needs, take your interest rate information with you when you make your enquiries. This will encourage the lending officer to see if there is any room to take a few extra points off the interest rate they offer you.

• Take out car dealership finance

  When you apply for a loan through the finance officer at a car dealership, you have lots of room to negotiate on rates. This is because the dealership often receives its loans at discounted rates, leaving it extra room to bump up the rate you pay. That margin between what the dealer pays to the lender and what you pay to the dealer forms their "trail" commission. In other words, every time you make a payment, some of it goes towards paying interest to the lender and some goes to paying commission to the car dealership. Haggle and negotiate on the rates you're offered through the car dealership. It will usually have around 2% that it can drop from the initial rate that it quoted you.

• Can you get a package deal?

  Some banks will offer a discount on their advertised interest rates if you also have other banking products with them. If you already have a mortgage, a credit card and a transaction account with one bank, ask if it will give you a discount on your car loan if you add that to your package.

Ways you can reduce your monthly repayments

It's always possible to reduce the payments you make on your loan each month. The key is to ensure that you're not paying more than you really should over the entire term of the loan. Here are some ways you can reduce your minimum monthly payments.

• Lower the interest rate

  By reducing your interest rate even a little, you should end up paying less on your monthly payments. This is one of the primary reasons why you should always take the time to check comparison sites before you apply for any type of finance.

• Borrow less

  Borrowing $5,000 more over a 5-year loan term adds up to $1,000 extra per year you have to pay back, plus interest. This adds up to approximately $90 per month out of your pocket. You can reduce the amount you need to borrow by offering a trade-in of your old vehicle or even paying a slightly larger deposit out of your savings.

• Consider a residual balloon payment

  If you borrow $30,000 and leave a $10,000 residual balloon payment to be paid at the end of the loan term, your repayments will be calculated based on the $20,000 to be repaid, plus interest on the entire $30,000. You'll need to cover this cost at the end of the term, or refinance your car with the lender.

• Opt for a longer loan term

  When you choose a longer loan term, the amount you're required to pay each month is reduced. Unfortunately, the lender also gets to charge you interest on your debt for a longer period of time, so you could end up paying far more in interest over the loan term.

Comparison: Loan terms on a $25,000 car loan

In this example, Option 1 has a higher monthly repayment, but you only end up paying $5,594.38 in interest over the term of that loan. By comparison, Option 2 allows you to pay $117.13 less per month on your monthly repayments. This will definitely make budgeting easier throughout the loan term, but you end up paying $7,993.22 in interest over the loan term. This is $2,398.84 more in interest charges you end up paying overall.

What you'll need to apply

Below is a checklist of some of the information and documentation you may need to supply for your car loan application.

Questions you may have about car loans

If you still haven't found the information you're looking for, we're confident you'll find it below.

• Can anyone apply for a car loan?

  Yes, if you meet the eligibility requirements. As long as you are older than 18, you're a permanent resident of Australia and you can verify that you earn a steady income, you may qualify.

• How much can I borrow on a car loan?

  The amount you're able to borrow for a car loan is determined by your income and current liabilities as well as the specific loan you apply for. There may also be minimum car loan amounts set by individual lenders. Lenders usually offer between $5,000 and $80,000 if the loan is secured.

• Can I get a pre-approval for a car loan?

  Yes. Pre-approval for a car loan is a great way to work out how much you can comfortably borrow and what your repayments will be before you head out car shopping.

• How long does it take to get approval?

  The approval process for car loans is usually very quick. In most cases, you should get a conditional approval in a couple of hours, but it may take longer depending on the lender.

• Can I include the insurance and on-road costs in my loan amount?

  Some lenders will allow you to include your car insurance premium and other costs associated with the purchase in your loan amount. Always ask to be sure this applies to your loan type.

• Are there any types of cars I can't buy with my loan type?

  Some lenders will place restrictions on a vehicle's age and even some restrictions on some car makes and models. If you're in doubt with the car you want to buy, take the time to ask your lender some questions about whether it will be suitable for them to use as security for your loan.

• Do I need a deposit for a car loan?

  Some lenders will allow you to borrow the entire purchase price of your car. This will depend heavily on the strength of your financial situation and your credit history.

• How do I make payments to my loan?

  Your repayments can be made automatically via direct debit on a weekly, fortnightly or monthly basis with most lenders. This is where a specific amount is debited from your regular transaction account each month to cover your payment. Some lenders will also allow you to make your payments via BPAY if you prefer.

• Can I make extra repayments on my car loan?

  This will depend entirely on the lender you choose and the type of car loan you want. Some loans will charge you an early repayment fee for making extra repayments while others won't. It's always a good idea to check whether an early repayment fee will apply to your car loan before you proceed with the application.

• How do I make extra payments on my loan?

  Most lenders will allow you to make additional repayments in a variety of ways. You can choose to make a payment directly into your loan account using BPAY, transfer funds electronically from your regular transaction account over to your loan account or nominate to have each payment taken out at an agreed amount as part of your direct debit agreement. For example, if your minimum repayment is $387.50 per month you might nominate to have your direct debit payments set to pay $400 per month instead.

• How is the interest calculated on my loan?

  Interest is calculated on your outstanding loan balance on a daily basis and charged to your account monthly in arrears.

• Can I buy a car privately or do I have to buy through a dealer?

  You are able to buy your car through a private seller if you wish. You will need to provide details about the car to the lender, such as registration number and vehicle identification number (VIN) for the loan to proceed.

• Does applying for a car loan affect my credit report?

  Any enquiries you make for any form of credit will be entered onto your credit report as an enquiry with that lender. If your application is declined and you end up submitting another application elsewhere, your report will show 2 enquiries. Our guide to car loan credit checks explains this further.

• I've got bad credit. Can I still apply for a car loan?

  Many banks may decline a car loan application from a borrower with a bad credit history. However, there are some lenders out there willing to let you borrow money even with bad credit. You may want to discuss your application with a car finance specialist before you proceed. This will help you to locate the appropriate lenders to help with your situation and improve your chances of getting your loan approved. These loans will generally be secured against the car in case of default.

• Should I choose a balloon payment at the end of my car loan?

  A balloon payment is a residual amount of money that needs to be repaid at the end of the loan term. This type of loan lets you reduce your monthly repayments throughout the term of the loan, then you need to pay off the lump sum amount still owing at the end. You might choose to sell the car to pay off the lump sum amount due or trade it in on another vehicle and refinance that residual amount into your new loan. You can read more about balloon payments on car loans in our guide.

• Will I still owe the bank money if they repossess my car?

  In the event that you stop making your car loan repayments, the lender may choose to repossess your car. It will sell it in an attempt to recoup some of its money along with covering any repossession fees they were charged. If the sale price of the car doesn't fully cover those costs or pay off your outstanding loan amount, you may still need to repay the bank the outstanding balance.

• Am I able to get out of a car contract with a car dealer?

  Yes, you are. You have the right to cancel a contract within 3 clear days after you’ve signed the contract unless you are responsible for the car’s delivery within this time.

• How can I cancel my contract through cooling-off rights?

  It’s important to know whether or not you are able to cancel your contract through the cooling-off period. Once you know that you are able to do this, fax a letter to the vehicle trader explaining that you would like to break the contract through the cooling-off period. Keep a copy of it and ask for proof that the company received it within 3 days of you signing the contract.

• Am I able to do this for every car contract?

  Some car traders do not allow you to have cooling-off rights. This is important to know before you try and break the contract through the cooling-off period.

• Are there different cooling-off periods between states?

  Yes, there are. If you purchase a used car in Queensland, there is a cooling-off period of 1 day but there are no cooling-off periods for new vehicles. In New South Wales, there is a cooling-off period for new cars of 1 day that finishes at 5pm on the next business day. This does not apply to motorcycle purchases. In Western Australia, there are no cooling-off periods for any vehicle contracts, but you are able to break the contract before the dealer has informed you that the contract has been accepted.