Comparison rates from 6.31% p.a*
No credit score impact
Quotes from 30+ Australian lenders

Your car loan options

Secured car loans for new and used cars
Borrow up to $150,000
No deposit required

Choice of loan term from 1-7 years
Balloon payment options
Flexible repayments (weekly, fortnightly or monthly)

Best car loan interest rates in Australia

Car loan interest rates in Australia start from around 5% for a new vehicle, and from 6% for used cars.

The lowest car loan rates are generally available on electric vehicles, as some lenders offer ‘green car loans’ with discounted rates.

But remember, car loan interest rates vary significantly between lenders and even from one borrower to another. The actual rate you get will depend on:

Which lender you apply with: Shopping around multiple lenders can make a huge difference.
How old the car is: Lenders offer lower interest rates on new cars.
Your credit score: The higher it is, the lower your rate will be.
Your overall finances: For example, how much other debt you have could be a factor when the lender is calculating risk.
The loan term: A shorter term could mean you get a lower rate.

How to find the cheapest car loan

Getting the cheapest car loan is not as simple as just checking the interest rate on the loan. The overall cost of the loan is what matters. On a new car costing tens of thousands of dollars, it can matter a lot.

This means looking at several factors together:

Interest rate

This is still the most important factor so make sure you get the lowest rate possible. Don’t be fooled by cheap rates advertised by lenders. The actual interest rate is higher for most borrowers.

Fees

Car loans can come with application fees, monthly or annual fees and fees for making extra repayments or paying the loan off early. But it’s possible to find car loans with little or no fees.

Comparison rate

This combines the interest rate and most loan fees to show you a more realistic cost of the loan per year.

Extra repayments

A loan that allows you to make extra repayments without being penalised will give you the ability to save on interest. It’s simple, interest charged on the current balance of the loan and the sooner you pay down the loan, the less interest you’ll pay.

Flexibility

As well as being able to make extra repayments, look for a loan that allows weekly or fortnightly repayments and not just monthly ones. Making more frequent repayments will also help you save on interest. Every little helps.

Of course, the cheapest car finance option may not even be a car loan. For example, you you're eligible, you could consider a novated lease which offers tax savings that other forms of car finance don't

How to apply for a car loan: step-by-step guide

1. Check you’re eligible

It’s important to make sure you’re eligible for a car loan before you apply. The basic requirement are:

You’re over 18 years of age
You’re an Australian citizen or permanent resident & You’re employed and/or have sufficient income to cover the loan repayments
You don’t have any major issues in your credit history
You’re buying a car that meets the lender’s eligibility criteria

3. Compare your options

But don’t compare based on the ‘advertised rates’ and the generic offers displayed by lenders. You need to compare based on tailored rates to find your best rates. This is where we can help you compare personalised quotes from more than 30 lenders.

4. Make an application

When you’ve found the lender offering the best car loan for you, you submit an application via its website (or we can do it on your behalf to save you time). When applying you generally need to provide details about your income, expenses and other debts. You’ll need to provide proof of ID as well as bank statements and payslips.

If you’re approved and you have already found a car to buy, the lender will release the loan funds for you to purchase the vehicle. If you haven’t found a car to buy yet, you will get…

5. Get car loan pre-approval

If your application ticks the lender's boxes, it will pre-approve your car loan and let you know the maximum amount you can borrow.

6. Find your car

With pre-approval on your car loan secured, you can go car shopping with a firm budget in mind.

7. Finalise your loan

Once you have found a car to buy, you will be able to finalise the loan application by giving the lender details about the vehicle. You may also need to provide evidence that you have arranged to take out insurance for the vehicle.

Step-by-step process for getting a car loan in Australia

How do car loans work?

Secured versus unsecured car loans

Chances are if you’re getting a car loan it will be secured by the car you’re buying. That means the lender retains an interest in the vehicle and can repossess it if you can’t repay the loan. This reduces risk for the lender, so interest rates on secured loans are usually lower. You can generally also borrow more with a secured loan.

The other option is an unsecured loan where the vehicle is not used as security. Unsecured loans are generally more flexible (you can use the loan funds for any purpose) but are more expensive.

Fixed versus variable rate car loans

Most car loans have a fixed interest rate. This means your interest rate and regular repayments won’t change over the loan term. But there are also car loan options with a variable interest rate. If you go with a variable rate your interest rate and regular repayment could go up or down during the loan term. Fixed rate loans offer stability and budgeting certainty, while variable rate loans often come with greater flexibility to repay the loan early.

Balloon payments

Most lenders offer you the option to include a balloon payment on your car loan. With a balloon payment car loan, part of the loan amount is deferred until the end of the loan term, when it falls due as a large, one-off payment. The benefit of a balloon payment is your regular repayments will be more affordable, but the cost of the loan will be higher overall. You may be able to refinance the balloon payment amount into a new loan to pay it off gradually.

No-deposit car finance

It’s generally not a requirement to pay a deposit when buying a car with finance. In other words the lender will give you a loan to cover 100% of the vehicle cost. However, some borrowers choose to contribute a deposit to improve their chances of having their loan approved. It can be an option for bad credit car loans, for example.

Dealer finance versus banks

The kind of finance offered through car dealers is often very similar to the car loans offered by banks and online lenders. However, dealer finance is often more expensive, with higher interest rates and fees. Borrowers tend to pay more for the ‘convenience’ of getting their finance at the same time as buying the car.

Car loan pre-approval

The majority of lenders will offer car loan pre-approval. This means they agree in principle to lend you a certain amount of money, subject to final approval. The benefit of applying for pre-approval is you can establish how much you can afford to borrow before you go looking for a car to buy. It can also make the overall process easier.

What are the eligibility requirements for a car loan in Australia?

To be eligible for a car loan in Australia you typically need to be at least 18 years old, be an Australian resident or citizen and have a stable income. Lenders may also consider factors such as your credit history, employment stability, and how much debt you already have.

Can I get a car loan if I’m self-employed?

Yes you can, but you may need to apply for a low doc car loan if you cannot provide payslips to demonstrate your income. If the vehicle will be used for business purposes more than 50% of the time you may be eligible for business finance options, such as a chattel mortgage.

How much can I borrow for a car loan?

The loan amount you can borrow for a car loan in Australia depends on several factors such as your income, credit score, and the value of the car you want to purchase. Generally, lenders may offer car loans ranging from $5,000 to $150,000 or more.

What is the interest rate for car loans in Australia?

Interest rates for car loans in Australia vary among lenders and can depend on factors such as credit score, loan term and how much you’re borrowing. Typically, interest rates for car loans in Australia can range from 5% to 10% but can be higher for borrowers with lower credit scores.

What length of loan term should I choose?

The loan term for car loans in Australia generally ranges from 1 to 7 years, with shorter terms resulting in higher monthly payments but lower overall interest costs. Longer loan terms may result in lower monthly payments but higher overall interest costs. Getting the shortest loan term you can afford based on the regular repayments can be a good way to minimise your interest costs.

Can I get a car loan with bad credit in Australia?

Yes, it is possible to get a car loan with bad credit in Australia. But it may be more expensive as you will have fewer lenders to choose from. Your application will also be considered riskier by lenders who will charge higher interest rates and fees.

Do lenders require a deposit for a car loan?

You generally don’t need to pay a deposit when taking out a car loan. But if you do make a contribution towards the cost of the car your regular loan repayments will be lower.

Can I pay off my car loan early?

Yes, many car loans in Australia allow for early repayment without penalty. But it's important to check the terms and conditions with your lender as some lenders may have early repayment penalties which will cancel out some of the saving you make by repaying the loan early.

What documents do I need to apply for a car loan?

You’ll generally need to provide proof of identity, proof of income such as payslips or tax returns, employment details, and details of the car you plan to purchase such as the purchase contract or invoice.

Can I refinance my car loan in Australia?

Yes, you may be able to refinance your car loan down the line to get a better interest rate or an extended loan term. Refinancing simply involves switching your existing car loan with a new loan. There can be refinancing costs, such as loan discharge fees and application fees for the new loan.

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Disclaimer

Money Pty Ltd (trading as MotorFinance.com.au) Australian Credit Licence 528698 provides information about credit products, life insurance, solar and other products and is authorised to do so as the holder of Australian Credit Licence 528698. MotorFinance.com.au does not compare every Lender all products or issuers available in Australia. We are not a broker or credit provider and when we provide information via this website, we are not providing you with a recommendation or suggestion about a particular credit product.

*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $30,000 over 5 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.

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