Car Loans Australia: Compare Car Loans & Car Finance Rates

 How to save money on your next car loan

\Most people in Australia go through the process of getting a car loan, at least once in their driving life.

However, because cars are generally purchased many years apart, most people do not remember, or do not fully understand the process of getting car finance or how to get the best deal on a loan for their vehicle.

Below is a comprehensive overview of how to get a great finance deal in the quickest possible time. The information covered will include:

  • How to save 2%+ on your interest rate
  • The approval process and steps
  • Finance options available
  • Alternative options to getting a car loan
  • Guide to interest rates you should expect to pay
  • And more!

The business of providing finance to car buyers is big business and there is plenty of competition so it pays to have a look around. A great resource for calculating car loan payments is the new website.

Let’s take a look at car loan options in Australia!

Car Loans Comparison Chart

The chart below is interactive, so you can compare the loans by sorting each of the columns to find the best deal for you. Loans are based on a 3 year fixed term with a loan amount of $20,000.

Car Loan Provider
1 Yr Fixed
3 Yr Fixed
Comp. Rate
Loan Amount
Find Out More
IMB - New Car Personal Loan7.457.457.6320,
ANZ Online - Secured Car Loan8.598.599.4420,
ANZ - UnSecured Car LoanFrom 13.95% From 13.95% 17.07%20,
People's Choice - Discounted Personal Loan ($20,000+, Car 3 years or Less)7.647.647.9920,
Commonwealth - Secured Car Loan9.499.4910.5320,
Westpac - Car Loan (10k-100K)9.999.9911.0320, - Car Loan (New Cars over $18k Only),
NRMA - Secured Car Loan7.457.457.8820,
RACV Finance - Car Loan 7.457.457.8820,

What factors impact on the interest rate you pay?

Typically a newer car will attract a lower interest rate whereas a second hand or used car will generally be a little more expensive as loans are usually secured against the value of the car.

It is common for certain lenders to reject loan applications for older model cars (again because they are insuring against the value of the car which ultimately declines).

Sometimes how you buy the car impacts on both approval and the rate.

For example,  a private sale is typically a riskier bet for a lender and is often reflected by higher rates and lower approvals, whereas buying through a reputable car dealership that has an existing relationship with banks and lenders will often yield lower rates (if you action the cool 2% interest rate saving tip mentioned in a moment!).

Competition also plays a significant role in the rate of interest that you pay on the loan. When you are buying a new car, the loan industry is particularly competitive meaning that you are in a great position to compare lenders and get the best possible deal.

Here is a useful resource on how to compare car loans.

Tip for getting a cheap interest rate:

Here is a big tip on your interest rate when going through a dealer (I got this tip directly from a second hand car dealership owner with 30 years experience)… Car dealerships will usually make a considerable ongoing trail income on using preferred loan lenders.

These lenders effectively add a little mark-up on your interest rate and pay that to the car dealer by way of a commission for bringing in new business.

Loan lenders have a “bottom line” rate that they are happy to provide and anything above that rate is either cream on the cake for them, or paid to the car salesperson that sold you the car as a commission for using them for the finance!

What will often happen when using the preferred lender, or on-site lender at a car dealership is that they will actually happily offer finance at 7% for example, but will initially quote you at a 9% rate, with the car salesperson picking up a 2% commission!

You should always ask for a better loan and it is not uncommon to get 2% lower interest rate. Make it a condition of the sale, for example “drop the rate and you have a deal”.

Remember, the car salesperson makes a handy commission on the sale of the car and then a trail commission on the finance. They will quite often forgo their trail commission to ensure that they get the car sale over the line.

What are the options for Australian car finance?

explanation of Australian car finance options

There are plenty of options available, including loaning money, paying for it outright and also leasing a vehicle.

Below are the key options:

  • Chattel Mortgage: Provided to business owners. This is a common form of finance with some significant financial and tax advantages, including monthly repayments and being able to claim the GST on the car purchase upfront even though you do not have to pay for the vehicle in full upfront.
  • Finance Lease: With this option, again available for business owners, you make monthly payments but cannot claim the GST upfront. You do not own the car but will typically have the ability to buy the vehicle at the end of the lease term, or upgrade and get a new model.
  • Novated Lease: This is another type of lease where you do not actually own the vehicle. You pick the vehicle you want, but your employer actually takes responsibility for the car repayments. They make the repayments to the lender and then deduct the same amount from your pay each month from your pre-tax dollars. This is a fantastic benefit because you get to pay for your car with pre-tax money as opposed to paying for it after your tax has been taken out! Here is our comprehensive guide to novated leasing.
  • Hire Purchase Agreement: Financing in this way you get to select the car you want, but rather than buying it outright, the bank actually takes ownership of the car and you hire it from them over a set period of time making monthly payments. At the end of the agreement term you have the option to purchase the car.
  • Loan: This is a loan either in your personal or business name where your new car becomes security for the loan amount. You have a set term and set (usually) interest rate and make regular payments to the bank or lender.
  • Credit Card: Although not usually considered a way to buy a car, sometimes a low interest rate credit card is a quick and easy way to get a small sum of money. This is usually not suitable for expensive cars, but for a loan of a few thousand dollars it can be a perfect (and fast) solution.
  • Pay upfront: Of course, if you have spare cash or a redraw facility on your home loan, you can shell out the cash up front and eliminate the need for borrowing money in the first place. Another way to get the upfront money is to sell your current vehicle trough one of the best cash for cars companies.

car finance infographic

What is the difference between a personal and secured loan?

In short, a personal loan is a sum of money provided to you by the bank that you can spend on anything you like. The approval rate for personal loans has declined since the early-mid 2000′s given that banks have tightened up their lending policies.

A secured loan for a car is a little different, as the money given is provided purely for the purpose of allowing you to buy a car. The car itself becomes security for the bank to lend that money. What this means is the bank will loan you the money up to the market value of the car, and if you fail to make your repayments they can actually take your car!

How to reduce your loan repayments

There are three key things you can do to reduce the amount you have to pay each month.

1) Borrow less! Obviously, the more you borrow for your new car purchase, the more you are going to have to pay off each month. An extra $5000 over the duration of a 5 year loan adds $1000 per year to what you need to pay, plus interest! This is around $90 extra per month out of your pocket!

Before forking out big bucks, have a good look around at you options and buy a car that is within your financial means

2) Terms of the loan: Spreading the payments over a longer time periods reduces the amount you have to pay each month. Be aware though that the longer you have a loan for, the more interest you ultimately pay. Another option for reducing your repayments is to have a balloon repayment at the end of the loan term.

As an example, you could have a 30% balloon on a $20,000 car purchase meaning that you make repayments on 70% of $20,000 ($14,000) and then have to pay $6000 at the end of the loan term in order to own the car outright.

If you went for a no credit check loan or if you had to go down the route of securing a bad credit loan, then you will usually be paying a substantially higher interest rate to reflect the fact that you are a “higher risk customer’ to the lender based on your credit history.

3) Interest rate: Always ask for a discount, especially if you are arranging finance through the car dealer you buy the vehicle from. These agreements will almost always include a markup on the interest rate that exceeds the “baseline rate” that the lender would ultimately agree to providing you finance at.

As a rule, you should look for a discount of at least 2% and to get it, all you have to do is ask for a lower rate in return for you making a buying decision on the day!

Process for getting a vehicle loans approved in Australia:

The approval process for a car loan in Australia goes through three phases.

Step 1 is known as Conditional Approval. This step is simply you filling out an initial application and providing some details regarding to your financial circumstances etc. Based on what is in this initial application document, you will the proceed to step two, which is Final Approval.

During Final Approval, the lender will require you to back up the information that you provided in the initial loan application document.

This will require you to submit pay slips, group certificates, bank statements and perhaps other identification documents such as a license and electricity bills.

Have all this ready as soon as you submit your initial application so that you can promptly submit it all.

The final step is settlement and this is a fairly quick process. The loan has been approved and all that is required is for the lender to release funds to the seller of the car.

Congratulations, you are the product owner of your new vehicle with a suitable Australian car loan based on these simple car finance tips provided!

One option that many Australians are now looking at closely, particularly those that are unable to secure traditional bank finance for a vehicle, is a rent to won car. The rent to own model is popular in the home ownership space today, but is only just beginning to blossom in the auto industry. Here is our comprehensive rent to own car guide.

Article written by Damian Roberton