Why a personal loan might suit you more than a car loan for your next vehicle purchase

When you think about financing a vehicle, your mind may immediately go to car financing or a car loan. 

But the truth is, for some these options may not be available … which is where a personal loan may step up to the (number) plate.  

According to recent industry datas, the used car market continues to boom as the supply issues around new car microchips drag on. 

“With some people being forced to consider buying a used car as the microchip shortage puts the brakes on the supply of new cars, the used car loan market is running hot,” says Mozo spokesperson Tom Godfrey.  

“If the car you’re trying to purchase has a lot of ks on the clock, you might find some car loan providers unwilling to finance it, which is when a personal loan might come in handy.”

In fact, Mozo’s latest research showed that 52% of Aussies that took out a personal loan over the last 10 years, used the funds to purchase a car. It revealed that the average car loan borrowing amount was at $25,000, while for personal loans it sat at a lower $14,000. 

So, what does the car market look like right now? 

Recent numbers from the Federal Chamber of Automotive Industries show that 890,790 new cars have been sold across Australia since January of this year. 

“With car sales remaining steady, demand for car loans and personal loans is also continuing. But as with all personal finance products, it pays to compare loans to help ensure you’re driving home a good deal,” Godfrey says. 

According to the Australian Bureaus of Statistics (ABS), car finance loan commitments rose by 1.9% in September 2021 (seasonally adjusted). That’s an increase of $1.1 billion. 

“While you can use either a car loan or a personal loan to finance a vehicle purchase, it’s important to understand the differences between the loan types,” Godfrey explains. 

“Your credit record, whether you’re looking to buy a new or used car and how much flexibility you want with your finances, can all impact the type of loan you’ll need.” 

Right now on the Mozo database, the average new car loan interest rate sits at 5.95% p.a. while the average used car rate is a higher 6.57% p.a. Meanwhile, the average multi-purpose personal loan interest rate on the Mozo database is 7.59% p.a. and for unsecured personal loans it's 9.54% p.a.      

Where can I get the best personal loan to fund my next vehicle?

Ask the experts! 

As part of the 2022 Mozo Experts Choice Awards, Mozo’s judges compared 338 personal loans issued by 82 Aussie financial institutions. 

This year, People’s Choice was awarded the Personal Loan Provider of the Year as it snapped up awards in both the Unsecured Personal Loan and Car Loan categories. 

For the full list of winners across the best personal loans, car loans and line of credit, head to the 2022 Mozo Experts Choice Award for Personal Loans page. 

Want to start comparing personal loans right now? Check out these top deals below!