Car loan price guide

When buying a car, where do you start? Will your decision be based on the shape, the brand or how many passengers it can carry?

Perhaps your decision will be a combination of these. But a leading factor in your decision making will generally be the price.

So how much you can afford to pay may not lead you to the most suitable option? Let’s take a closer look…

Start comparing car loans now below. 

How much can I afford to repay?

There are so many ways to pay for your next car. If you have the savings you may opt to pay for it outright, however a car loan is a great option too. 

By opting for a car loan, you pay off your car at a steady pace within an agreed length of time, so that you can maximise on the savings you already have.

So the question is: how much you can afford to repay?

Just because you can afford the repayments on a $40,000 car loan, should you purchase a $40,000 car? Or will a new car that you only need a $20,000 car loan for serve the same purpose? 

Here's an example:

• Say you took out a four-year car loan with a 7.00% interest rate. For a $40,000 loan you'd be paying $958 in repayments each month. However, if you borrowed $20,000 instead, you'd make $479 monthly repayments.  

From easy loan comparisons and affordability, use Mozo’s loan repayments comparison calculator to see where you stand.

Car loan types

For those unfamiliar with loan types or who simply need a refresher, let’s take a look:

Secured car loan

This one’s as straightforward as you get. A secured loan relies on the value of an asset that matches or exceeds the value of the loan. The car that you purchase is usually used as the security on your loan instead of other cars or property in your name. 

Just to reiterate, an asset is used as ‘security’ on your car loan in case you default in repayments. You may be able to get a few weeks grace as long as you catch up, but be expected to receive a penalty of some sort if you miss a repayment. But delay your repayments and miss too many weeks or months, and you risk losing the car you’ve already started paying off.

Find out more about secured car loans here.

Unsecured car loan

This kind of loan is a little more difficult to secure and usually takes a little convincing that you are a suitable candidate for the loan. It may be easier however if you have an established relationship with a lender, where your other accounts are transparent to them.

With an unsecured loan, expect to pay higher interest rates, regardless on your rapport with your lender. There are structures in place that are out of their control so no point in trying to negotiate that one. And it’s completely understandable - after all, an unsecured risk, is still seen as a risk, no matter how long you’ve been a customer for.

Car loan tip 101: missing payments is no funny joke and can affect your credit rating and future borrowing power. You’re best to set up an auto payment to repay your debt without you needing to remember. Just make sure you have more than enough money in your account that covers your repayments and other everyday expenses. Get more car loan tips here.

Loan repayment scenarios

Still think about that fancy car? Ever wondered how much your repayments would be? Check out the breakdown between weekly, fortnightly and monthly car loan repayments across a 3-year and a 5-year fixed option below: 

Loan period 3 years (Fixed rate) 

	$15,000 car loan at 6.50%	$25,000 car loan at 6.50%	$50,000 car loan at 6.50%
Weekly repayments  Total interest over life of loan	$106 $1,510	$176   $2,517	$353  $5,032
Fortnightly repayments  Total interest over life of loan	$212   $1,520	$353   $2,533	$706   $5,067
Monthly repayments  Total interest over life of loan	$460   $1,550	$766   $2,584	$1,532   $5,168

Loan period 5 years (Fixed Rate)

	$15,000 car loan at 6.50%	$25,000 car loan at 6.50%	$50,000 car loan at 6.50%
Weekly repayments  Total interest over life of loan	$68 $2,560	$113   $4,268	$225  $8,536
Fortnightly repayments  Total interest over life of loan	$135   $2,572	$225   $4,287	$451   $8,574
Monthly repayments  Total interest over life of loan	$293   $2,610	$489   $4,349	$978   $8,698

As you can see, having a fixed rate on your loan can help your budgeting plan as your repayments will always be the same over the life of the loan.

With a variable rate, it may fluctuate during the term of your loan so it go from high, to low and anywhere in between. Although the repayments can go lower than a fixed rate, it’s still the risk you take.

Tips for buying a car

Before you sign the dotted line with a lender, here are a few simple tips that could save you thousands on your car loan:

1. Research and compare

There’s really no sense in making a large purchase like a car, without doing at least a little bit of research. Making rate, cost and product feature comparisons helps you get your head around what you actually need versus what you want. It also helps you figure out what you can afford and what is a suitable amount to pay. Use Mozo’s car rate comparison calculator to start your research off.

2. Car viewing

Going online and falling in love with an image of a car is really not enough. There’d be nothing worse to have paid $32,000 for a car you assumed put be the right look and feel then in person and after you paid for it it just wasn't right. Test drive a variety before making a decision.

3. Budget

This when it’s time to be as realistic as possible. You can afford to repay a car loan for $50K now, but will you still have the same job in 3 years? With the economic climate historically wavering and unsteady, can you really really on your current income to be the same in years to come? It’s a good idea to pick a car and price that will do the same job as a vehicle that’s less costly. After all, they depreciate in value the minute you make the purchase!

4. Used car

Buying a second hand car? Then a little caution is needed before handing over your hard earned cash or signing up for a car loan. If buying from a car yard, is it from a reputable place? If privately purchased, do you know the car history? Do a search on Revs.com.au to check the VIN. It’s also a good idea to pay a professional mechanic to look over it to ensure it’s roadworthy also. A couple hundred dollars could save you thousands of dollars of heartache if you buy a lemon.

Tips for choosing a loan

Buying a car is not just about haggling the price. You should also look for the best car loan rate deal to secure a loan that best suits your budget.

• Start by using Mozo’s car rate calculator to work out the repayments you can afford to part with.
• Make a decision between fixed and variable interest rates. Remember, a fixed rate makes it easier to budget every week, whereas variable is an unpredictable amount.
• Ask your lender about hidden costs: are the account keeping fees, charges to make the application, charges for a successful or unsuccessful application?
• Check to see if on-road costs included or an additional payment?