Car loans in Australia

Not everyone can afford to buy a car outright, so if you’re in need of some extra cash before getting the keys to a new vehicle, a car loan is one option to help. Whether you want a new or used car, it’s important to compare car loans features and look at personalised quotes before you jump online or head into a car dealership.

Secured vs unsecured car loans

A secured car loan means that if you’re unable to make your car repayments, your lender can seize the car and sell it to recoup its costs.

Secured car loans typically come with lower interest rates because your car is used as security (or collateral) for the loan, similar to how your property acts as security if you default on mortgage repayments.

On the other hand, an unsecured car loan doesn’t use your vehicle as security if you can’t make your repayments.

Unsecured car loans can be more risky to lenders, which means they tend to come with higher interest rates. Note that in some situations when using a car loan to buy an older vehicle, the used car might not be eligible as security and your lender might only offer you an unsecured loan.

Fixed rate vs variable rate car loans

Car loans come with either a fixed or variable rate, though the majority of car loans in our database come with a fixed rate:

Fixed rate car loans

Your car repayments will remain the same throughout your loan term with a fixed rate, which gives you certainty and can help you plan your budget. You’ll be safe from interest rate rises, but you won’t benefit from rate cuts either. Fixed car loans often come with perks associated with variable rates, such as free extra repayments.

Variable rate car loans

A variable rate car loan means your car repayments can change over time. Variable rates tend to fluctuate in line with the Reserve Bank of Australia’s (RBA) official cash rate, but the decision to pass on rate rises or rate cuts is ultimately up to your lender.

Bank car loans vs dealership finance: what’s the difference?

When you head to a dealership to buy a new car, you’ll probably be offered dealership finance to make your purchase. It can differ in some ways to a car loan you get through a bank or online lender – here’s what to keep in mind:

Car loan

Depending on the bank or lender, a car loan can be used on a wider range of vehicles, including new, used and classic cars, to motorcycles, caravans and more. The number of providers on the market means you can shop around and compare rates before heading to the seller. This may give you more choice on the terms and features of the loan, but it does require more effort on your behalf.

Car dealership finance

May be a more convenient option and allows you to go over the terms of the loan in person. Interest rates can be lower through dealership finance, but pay close attention to the comparison rate to get a more accurate understanding of the loan’s true cost. If advertised interest rates are low, consider what terms are the cause, such as a balloon payment.

What to look for when comparing car loans

Interest rate

Used to calculate how much interest you’ll be charged on the amount you borrow. It’s a good starting point, but it doesn’t factor in additional fees you might need to pay. Also consider how the interest rate will affect the balloon payment (if applicable).

Comparison rate

Indicates the true cost of a loan at a glance. It combines the interest rate, along with most fees and charges into one simplified percentage figure, making it easier to compare car loans from multiple lenders.

Fees

Car loans or dealership finance can come with fees attached. Some to look out for are application fees, monthly fees and early repayment penalties.

Loan length

Car loans typically come with terms that range between 1-7 years. A shorter loan term will give you higher repayments, while a longer term will likely make your monthly repayment amount lower. The longer the term, the more interest you’re likely to pay.