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Car loan interest rates: October 2020

By Peter Marshall ·

The car loan lending space has remained relatively quiet over the past few months, with minimal movements to interest rates and we are expecting that October will be similar. In September there were no changes across variable rates for both new and used vehicles, however some fixed car loan rates were modified. 

While variable rates for car loans haven’t changed recently, they still remain more competitive than the fixed rate options available. Queensland Country Bank continues to offer the lowest new car loan option, with a variable rate of just 2.99% (3.53% comparison rate*). For those looking to purchase a used car, Australian Military Bank has the most competitive variable rate at 3.60% (4.48% comparison rate*) for customers with excellent credit. 

If you are looking for a fixed rate car loan, Auswide offers the lowest fixed rate for new car loans, having dropped its rate by 141 basis points to 4.49% (5.10% comparison rate*). Even after increasing its rate by 0.50% last month, online lender has retained the cheapest used car fixed rate at 5.17% (5.73% comparison rate*). Of the the big four banks, Westpac’s Car Loan at 7.49% fixed rate (8.68% comparison rate*) is the most competitive available. 

It is great to see some lenders offering competitive rates in the green car loans space. The best fixed rate is currently’s Green Car Loan at 3.97% (4.52% comparison rate*) whereas Transport Mutual Credit Union offers the lowest green variable rate at 4.74% (5.04% comparison rate*).  

To find out how interest rates are tracking in other banking products for October check out our snapshot for Home Loan Interest Rates, Savings Accounts Interest Rates or Term Deposit Interest Rates.

Picture of Peter Marshall
Peter Marshall
Banking expert

Peter has been working in the Australian banking and finance industry for over 20 years and oversees Mozo’s extensive product database. He is regularly sought out for his expert commentary and analysis on banking and interest rates trends by print, radio and TV media.

Latest car loan interest rates on Mozo - page last updated October 22, 2020

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  • mozo-experts-choice-2019

    4.67% p.a.

    5.22% p.a.based on $30,000
    over 5 years

    Terms from 3 to 5 years. Representative example: a 5 year $30,000 loan at 4.67% would cost $34,096.76 including fees.

  • 4.89% p.a.

    5.53% p.a.based on $30,000
    over 5 years

    Terms from 1 to 7 years. Representative example: a 5 year $30,000 loan at 4.89% would cost $34,377.58 including fees.

  • 5.19% 18.95% p.a.

    6.08% 19.91% p.a.based on $30,000
    over 5 years

    Terms from 3 to 7 years. Representative example: a 5 year $30,000 loan at 5.19% would cost $34,730.13 including fees.

  • 5.50% p.a.

    5.85% p.a.based on $30,000
    over 5 years

    Terms from 1 to 7 years. Representative example: a 5 year $30,000 loan at 5.50% would cost $34,632.09 including fees.

  • mozo-experts-choice-2020

    6.79% p.a.

    7.16% p.a.based on $30,000
    over 5 years

    Terms from 1 to 7 years. Representative example: a 5 year $30,000 loan at 6.79% would cost $35,729.09 including fees.

  • mozo-experts-choice-2019

    3.97% p.a.

    4.51% p.a.based on $30,000
    over 5 years

    Terms from 3 to 5 years. Representative example: a 5 year $30,000 loan at 3.97% would cost $33,525.38 including fees.

  • 4.89% 8.89% p.a.

    5.44% 9.46% p.a.based on $30,000
    over 5 years

    Terms from 3 to 7 years. Representative example: a 5 year $30,000 loan at 4.89% would cost $34,276.58 including fees.


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*The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

**Representative example figures and monthly repayment figures are estimates only, based on the advertised rate, mandatory fees, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Car loans Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.

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Car loan interest rates resources

Reviews, news, tips and guides to help find the best car loan for you.

How are car loan interest rates calculated?

Car loan interest rates are set by the lender, but they are based on the official cash rate set by the Reserve Bank of Australia (RBA).

Each month the RBA meets and announces whether they have increased, decreased or kept the official cash rate steady. Changes to the rate may be a result of things like inflation, employment stats, economic growth and spending. Simply put, higher rates slow borrowing, economic activity and inflation, while lower rates encourage them.

Australia's lenders generally make changes to their loan products after an RBA announcement.

What types of car loan interest rates are there?

Like other loan products, car loans come with either a fixed or variable interest rate. Ultimately, the type of interest rate you choose can impact what you pay each repayment period. There are pros and cons to each option, so here's a breakdown of how they work.

Fixed rates

A fixed rate car loan is where you receive the same interest rate over the entire life of the loan term. Essentially, if you stick to your regular repayments, you will pay exactly the same amount to your lender each payment cycle. Plus, if interest rates spike during your loan period, your loan won't be affected as you've locked in your lower rate.

The downfall of fixed interest rates is that you won't benefit from any market changes if rates are reduced. Some lenders also charge early repayment penalties on fixed rate car loans - meaning if you pay off your entire loan in full before your loan term is up, you could face a hefty fee.

Variable rates

The other option is a variable rate car loan. Unlike a fixed car loan, a variable interest rate can go up or down during your loan term, typically in line with benchmark interest rates set by the Reserve Bank Of Australia. On the one hand this could work in your favour, but on the flip side, it could end up costing you more if the rate goes up.

There is one solid benefit of a variable rate car loan though, you rarely will pay an early repayment penalty if you square things away ahead of time. So if you plan to throw a little extra cash towards your car loan, and don't mind the risk of a rate spike, a variable loan may be the option for you.

Comparison rate

The truth is the interest rate on your car loan is unlikely to be the only cost you face. There may be a range of other additional fees and charges that you need to factor in. This is where the comparison rate comes in.

According to the National Credit Code, Australian lenders must display comparison rates when advertising loan products. The comparison rate incorporates things like the interest rate, fees and charges, so that you, the customer, has a more rounded view of what the loan is going to cost. Make sure you check the comparison rate on a car loan before applying, it may be a lot higher than the headline rate.

If you'd like to compare the difference between a fixed or variable interest rate car loan, check out our car loan comparison calculator.

How are my car loan interest repayments calculated?

Your car loan repayments and how much you pay in interest depends on a few things, like the rate you receive, how often you make repayments and the length of your loan term. In short, your repayments are split between paying down your principal (what you borrowed) and paying back interest (what the bank charges).

When you first take out the loan, a larger portion of your repayment will go towards paying interest. As the principal on your loan lessens so does the amount of interest you pay on it. This means towards the end of your loan term, the majority of your repayment will go towards your principal rather than interest.

If you want to figure out how much your car loan might cost you each week, fortnight or month, crunch the numbers with our car loan repayments calculator.

How can I get the best interest rate on a car loan?

When it comes to the best car loan interest rate, there are plenty of options for you to choose from as most banks and lenders in Australia will have a car loan option. So, it's a good idea to do some research, shop around and find the right rate for your budget.

Here are Mozo we have a range of great tools that can help you find a car loan to suit you:

  • Car loan comparison page - weigh up a range of car loan options from the big four to smaller banks, credit unions and online lenders.
  • Car loan calculators - find out how much your repayments might be, how much you can afford to borrow and compare car loan products.
  • Car loan guides - get the whole car loan picture with the ins and outs of loan features, how to apply and what to watch out for.

Don't forget there's also a bunch of general interest rate guides, with all you need to know about how they work across all loan products.

Picture of Kelly Emmerton
Peter Marshall
Banking expert

Peter Marshall has been working in the Australian banking and finance industry for over 20 years and oversees Mozo’s extensive product database. He is regularly sought out for his expert commentary and analysis on banking and interest rates trends by print, radio and TV media.

FAQs about car loan interest rates

What is the comparison rate?

A car loan comparison rate is designed to give consumers a more accurate idea of how much the loan will cost. Not only does it consider the headline rate, but it also takes into consideration any upfront and ongoing charges you may face over the life of the loan. So remember, when comparing car loan interest rates, always refer to the comparison rate when weighing up your loan options.

Is a fixed or variable interest rate car loan better?

There is no right or wrong when it comes to choosing either a fixed or variable interest rate car loan, it all depends on your financial situation. See above for breakdown of fixed versus variable rates.

What other car loan features are there?

Along with a competitive interest rate, you'll want to find a loan that also comes with flexible repayment features and options. Some of these include free extra repayments, redraws, repayment schedule options (weekly, fortnightly or monthly) and a range of loan terms.

Also remember to keep the fees to a minimum. Avoid forking out too much on charges like application fees, monthly service fees, exit fees or early repayment penalties.

What is risk-based pricing?

Risk-based pricing refers to a tiered interest rate system, whereby a car loan lender offers a customer a particular rate based on their credit score. Ultimately, interest rates are calculated depending on how much risk a potential borrower poses to the lender (whether they are likely to default on their loan or not).

Rather than offering a "one size fits all" standard rate, risk-based car loan lenders advertise a minimum and maximum interest rate. Based on the customer's data, the lender can offer a rate that sits anywhere between those two numbers. For those with a good credit history (that are "low-risk") will be offered a lower rate, while those with a poor credit rating ("high-risk") receive higher rates.

In some cases, risk-based pricing can be determined by the loan term a customer selects. For example, those choosing a 2-year term may get a lower rate than those that choose a 5-year term. However, this mode of pricing is much less common than that based on credit history.

Are car loan rates negotiable?

While car loan lenders may not promote the fact, it is possible to negotiate your car loan rate. Remember, the deal you are offered upfront from a lender may not be the best they can do. So, why not ask?

At the end of the day some lenders would rather take a small decrease in interest payments over losing you as a customer all together.

How can I reduce the amount of interest I pay?

When taking out a car loan, you ultimately want to pay as little in interest as you can. So, here are some ways to avoid forking out too much in interest:

  • Choose a shorter term: Car loans come with a range of different terms, from one year to up to 10 years. Think of it this way, the shorter the term on a loan the less time a lender has to charge you interest. So, if it is within your budget to do so, opt for a shorter loan term.
  • Make extra repayments: The more you can chip away at your loan the better, because ultimately the less there is to charge interest on. Make extra repayments when you can and pay off that loan sooner!
  • Work on your credit score: If you aren't after a loan right away but may need one in the future, an easy way to reduce the interest rate you receive is to repair any damage to your credit score. With a healthy credit history you can take advantage of loans with risk based pricing and you give yourself a greater chance at receiving a low interest car loan.