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Learn more about how car loan brokers work and compare car loans available through brokers.

What’s new in car loans in October 2023?

New car sales in Australia are continuing to break records, with the Federal Chamber of Automotive Industries (FCAI) recording 110,702 sales in September 2023. This included 8% battery electric vehicles and 18.3% electrified vehicles (battery electric, hybrid and plug-in hybrid), with the Tesla Model Y appearing in the month’s top five best-sellers.

Whether you’re looking for a petrol-powered or electric vehicle, you may need car finance to make your purchase. Comparing car loans can potentially become much simpler when you check out the top-rated car loans according to RateCity’s Real Time Ratings™.

Some of the top-rated new car loans at the time of writing include:

Updated by Mark Bristow on 4 October 2023.

What is a car loan?

Having a car is an essential part of life for millions of Australians. Whether you’re a first-time driver looking for a used car, a tradie searching for a new work ute or van, or a growing household in need of a larger vehicle, purchasing a car is a significant financial commitment. However, not everyone has the ability to pay cash up front to cover the cost.

A car loan is a specific type of personal loan that you can use to buy a new or used vehicle when your savings won’t cover the total cost. When you take out a car loan, you will have to make regular repayments over a fixed period towards the lump sum you borrowed (the principal), as well as interest accrued. The interest rate will apply on the loan amount from the time you take out the loan.

Picking the right loan isn't just about going with whatever a car dealer suggests - take some time to compare your options. But remember, it's not just about scoring the lowest interest rates. You also have be on the lookout for the different fees that lenders might charge.

Apart from the application fee for processing your loan, some lenders might hit you with ongoing annual or monthly service fees. If you decide to pay off your loan early, be aware that you may encounter a prepayment penalty.

When you're in the market for a car loan, make sure to give the lender's Product Disclosure Statement (PDS) a good read. That's where you'll find all the nitty-gritty about the fees. Going for a car loan with minimal fees can save you some cash in the long run. So, don't forget to crunch the numbers, considering both the interest rate and fees, before making your choice.

What types of car loans are available?

There are several different types of car loans on the market, each of which meet specific financing requirements, including:

New car loans

Tailored for individuals aiming to purchase vehicles with relatively minimal mileage and youthfulness, usually not exceeding two years from their manufacturing date.

Used car loans

Designed for those lookin to acquire vehicles that have surpassed a certain age threshold, typically more than two years since their production.

Green car loans

For buyers interested in vehicles embracing environmentally-conscious technology, such as electric, hybrid, and fuel-efficient models.

Unsecured car loans

A loan not secured by the value of an asset. As there is no collateral, if you default on your loan repayments, your lender cannot repossess the vehicle you have purchased.

Secured car loans

A loan secured by the vehicle you're purchasing. If you default on your loan repayments, your lender may repossess the car you bought.

Balloon payment

Car loan repayments are divided up so that they begin smaller, with the borrower paying a larger portion of the loan (say 25%) at the end. 

Chattel mortgage

Chattel mortgages are a finance option when you want to buy a vehicle for your business needs. The lender puts a legal claim on the item you're financing as collateral for the loan. This means that they can take it back if you don't keep up with your payments. But once you've paid off the loan in full, the ownership of the vehicle is all yours.

Operating lease

Similar to a long-term car rental arrangement, involving a company leasing a car for an extended period.

Commercial hire purchase

Closer to a rent-to-buy arrangement, generally involving a finance company buying a car on your behalf and letting you use it in return for regular rental payments. After several payments, you may own the car.

Car lease

Much like a commercial hire purchase, but with more options. You rent the vehicle for a set period and at the end, you either return the car or buy it. You may find that some leases offer options for customers to trade-in their vehicle in order to upgrade to the latest model.

Novated lease

Like a car lease, but with a more complicated ownership structure, as you acquire the car from a second party (typically an employer), who in turn leases it from a third party (a finance company).

How do car loans work?

A car loan is a formal finance arrangement for the purchase of a motor vehicle between three parties: the buyer (you), the vendor (the entity selling the car, typically a car dealership), and the lender (the institution providing the funds you're borrowing).

These are steps you can take to obtain and use a car loan:

  1. Search and compare a range of car loans to find the one that best suits your needs
  2. Submit an application for a loan with your preferred lender
  3. If your application is approved, the lender will agree to provide you with an agreed amount to buy a vehicle
  4. Sign a purchase agreement with the vendor
  5. The lender pays the vendor on your behalf
  6. You repay the lender, usually over a period of several years

Car loan amounts can range from $5,000 through to $100,000 and often have loan terms from 1 to 10 years. Interest rates generally vary between 2.99% and 10% for secured car loans, and up to 15% for unsecured loans. However, rates can exist outside these estimations, depending on market conditions and fluctuations.

Car loans typically come with fixed rates so that your repayments remain the same for the life of the loan. Variable rate loans are also available, with additional features like extra repayments or redraw facilities often reserved for these loans. The interest rate on a car loan may often be lower than on an unsecured personal loan as the loan is typically secured by the car you are purchasing. Therefore, the risk for the lender is lower. 

When it comes to finding a car loan that meets your unique needs, it's helpful to narrow down your options. Since everyone's financial situation is different, there isn't a one-size-fits-all loan that works for every borrower. To ensure you find the right car financing option for you, it's essential to compare a range of different loans and do your research.

So, where do you start? Once you've decided on the car you want to buy, it's crucial to evaluate your borrowing capacity before you begin searching for loans.

You could use RateCity’s Borrowing Power Calculator to get an estimate of how much you might be able to borrow based on affordable repayments. Once you have a good understanding of your borrowing capacity, you could start researching car loans that align with your requirements.

Depending on the lender you choose, you may even apply for pre-approval for a car loan. Pre-approval, also known as conditional approval, refers to a situation where the lender agrees in principle to lend you money to purchase a car. A pre-approval could provide you with a more realistic budget, making it easier to narrow down your options while shopping and preventing overspending.

Getting pre-approved for a car loan could also increase your bargaining power when negotiating the car’s price with the seller. Sellers often view pre-approved buyers as more committed to the purchase, and may be more inclined to provide them with the best possible deals to ensure a successful sale.

While getting pre-approved for a car loan could be helpful, it isn’t a mandatory step to obtaining a car loan. Further, a pre-approval doesn’t guarantee you’ll be given full approval for a car loan. You’ll still need to apply for final or full loan approval after you select the model you intend to buy.

Is a car loan just a personal loan for cars?

A car loan is a type of personal loan, specifically designed for the purchase of a vehicle. Where a personal loan can be used for a variety of purposes (holidays, renovations, weddings etc.), a car loan is used strictly for vehicle purchases.

A personal loan can be either secured or unsecured, depending on whether it is backed by a specific asset like jewellery or art. In contrast, a car loan is typically secured by the vehicle itself. Unsecured personal loans generally have higher interest rates as there is more risk for the lender without collateral.

Moreover, certain lenders may have restrictions on financing vehicles of a certain age. Typically, "used cars" refer to those between 1-5 years old. If you intend to obtain a long-term loan for a car that is already five years old, the lender may reject your loan application.

When deciding between a car loan and a personal loan, consider your ability to manage potentially higher interest rates with personal loans, the age of the desired car, and your comfort level with using it as collateral.

Car loan benefits and disadvantages

As is the case with any significant financial decision, it’s worth weighing up the benefits and detractors of taking out a car loan.

What are the benefits of a car loan?

  • Affordability: Car loans allow you to purchase a vehicle without having to pay the entire purchase price upfront. Instead, you can spread the cost over a period of time, making it more affordable and manageable for many people.
  • Convenience: Car loans provide convenience by enabling you to drive the vehicle immediately while making monthly payments. This allows you to have access to a car without having to save up a large sum of money first.
  • Credit building: If you have limited credit history or want to improve your credit score, responsibly repaying a car loan can be beneficial. Consistently making payments on time demonstrates financial responsibility, which can positively impact your creditworthiness.
  • Ownership: Unlike leasing, car loans allow you to own the vehicle outright once you've paid off the loan. This means you can modify or sell the car as you please without any restrictions.
  • Low, fixed interest rates: A car loan's interest rate may often be much lower than that of other finance options, such as an unsecured personal loan. Additionally, car loan interest rates are typically fixed over the life of the loan.

What are the disadvantages of a car loan?

  • Interest and total cost: One of the main disadvantages of car loans is the additional cost you incur due to interest charges. The longer the loan term and higher the interest rate, the more you'll end up paying in total. It's essential to consider the interest rate and loan term when evaluating the affordability of a car loan.
  • Depreciation: Cars generally depreciate in value over time. If the loan term is long and you put a small down payment, you may owe more on the loan than the car's value. This situation, known as being "upside down" on the loan, can make it challenging to sell or trade in the vehicle without incurring a loss.
  • Debt and financial obligation: Taking on a car loan means taking on debt. If you're already dealing with other debts or have a limited income, adding another loan payment to your monthly expenses may strain your budget and financial stability.
  • Repossession risk: If you fail to make timely payments, there is a risk of repossession as car loans are typically secured by the purchased vehicles. If you default on the loan, the lender may seize the vehicle, which can have severe consequences for your credit score and financial situation.
  • Limited flexibility: Once you commit to a car loan, you're locked into the repayment schedule and terms. If your financial circumstances change, such as a job loss or income reduction, it can be challenging to modify the loan agreement.
  • Restrictions: Your lender may have restrictions on the type of car you can buy, such as if it is new or used, or a sports car, etc.

How much can I borrow with a car loan?

When it comes to borrowing money for a car, it's important to understand that the lender doesn't have to give you any amount you want. They take a look at your personal financial situation, like how much money you make, what expenses you have, and your credit history, to determine the maximum amount you can borrow.

Lenders want to make sure you can afford to pay back the loan without any issues, especially if you've had credit problems in the past. That's why they ask for things like your bank statements or proof of income when you apply for a loan. They need to see evidence that you have enough money coming in to cover the loan payments.

Curious as to how much you may be able to borrow? RateCity’s Borrowing Power Calculator allows you to obtain an estimate. Simply enter how much you want to repay, the repayment frequency (weekly, fortnightly or monthly) and the loan interest rate. The calculator will then show you a projection of how much you may be able to afford to borrow.

Before you apply for any financial product it’s worth checking your credit score. Car loan lenders' eligibility criteria for loans typically dictates that those with good to excellent scores are preferred applicants.

Errors can occur and so can negative credit events, so if you believe your credit score has fallen, or if you’re working on boosting it, you’ll want to check what your score is before applying. After all, if your car loan application is rejected, this may further hurt your credit score.

Are there any other costs to consider?

Figuring out how much you can comfortably borrow isn't just about the loan itself. You've got to factor in all the extra costs that come with buying and taking care of a car. This way, you can budget smartly and avoid any financial headaches.

And remember, even if you've owned cars before, each one comes with its own set of costs for running and upkeep. Some of the main things to think about when you're adding up the total cost of owning a car are:

  • Stamp duty: When purchasing a car, you may be required to pay a one-time stamp duty fee. This fee may varies based on the value of the vehicle and the state you reside in.
  • Registration: Every car must be registered with the appropriate authorities. Registration fees vary depending on your location and the type of vehicle you own. These fees are typically renewed annually or biennially.
  • Car insurance: Acquiring car insurance is crucial to protect yourself and your vehicle in case of accidents, theft, or damage. Insurance premiums vary depending on factors such as your age, driving record, location, and the type of coverage you choose.
  • Petrol costs: Fuel expenses constitute a significant portion of car ownership. The cost of petrol varies based on the fuel efficiency of your vehicle, the distance you drive, and the prevailing fuel prices in your area.
  • Regular services, maintenance, and repairs: Cars require regular servicing to maintain optimal performance and ensure longevity. Routine maintenance tasks such as oil changes, tire rotations, and brake inspections incur costs. Additionally, unexpected repairs due to wear and tear or accidents may arise.
  • Tolls: Depending on your location, you may encounter toll roads or bridges that require payment for use. These fees can add up over time, especially if you frequently commute on toll routes.

By accounting for these various expenses, you can obtain a more comprehensive understanding of the financial commitments involved in owning a car. This knowledge will assist you in determining a suitable borrowing amount that aligns with your budget and allows for the smooth operation and maintenance of your vehicle.

Car loan repayment calculator

Compare and save using our Car Loan Calculator

Calculate what your repayments could be on your car loan.


How to apply for a car loan

  1. Check your credit score: Checking your credit score should only take a few minutes to do through an online provider, usually free of charge. You’ll just need some identification such as your passport and driver’s license. Once you know your credit score, you’ll have a better understanding of which loans and interest rates might be available to you.
  2. Search and compare car loans: RateCity allows you to easily compare a wide range of car loan options, including low interest rate car loans, so you can find one that best suits your individual needs.
  3. Assess your budget: Use a car loan calculator to get an estimate of the total cost of the loan and what your weekly, fortnightly or monthly car loan repayments could be. This could put you in a better position to make an informed decision.
  4. Check the eligibility criteria: Once you have compiled a shortlist of potential car loans, check to see whether you meet all the eligibility requirements. Keep in mind that these can differ from loan to loan. Consider reaching out to the lender, or check the FAQs on their website, if you are unsure about anything.
  5. Prepare your application: If you're already comparing car loans on RateCity, you can click directly through to the lender's website where you can apply online for your chosen car loan. It might be a good idea to have all your required documentation ready before you get started.
  6. Submit your application and await a decision: Once you submit the information required, you may receive an immediate response from the lender with an update of your application status, or this may take a little longer. Car loan approvals can happen in as little as a few hours to as much as a few days.

What are the requirements to get a car loan?

While each lender may have its own eligibility criteria, they generally all have the same requirements:

  • Proof of age, identity and residence: You must be over 18 and an Australian citizen or permanent resident to qualify. You will need to provide your driver’s license and/or similar identification.
  • Proof of income and expenses: Payslips, bank statements or similar documents to show that you can afford the car loan repayments with money earned from your job, while managing your other household costs.
  • Details of assets and liabilities: Information on what else you own (e.g. your home, shares, other cars) and what you owe (e.g. credit cards, personal loans, mortgage).
  • Proof of savings: Some lenders may request bank statements to view your spending habits and see if you can responsibly save money.
  • Good to excellent credit score: Some car loans are only available to borrowers with a minimum credit score or higher.
  • Information about the car and insurance: If you’re applying for a secured car loan, you’ll need to provide details of the vehicle to be used as collateral

How do you compare car loans?

To help you compare car loan options and choose the right one for your financial needs and situation, you’ll want to understand the factors that go into a car loan.

Car loan factorAbout
Interest rateA loan's interest rate comprises two components: the advertised rate and the comparison rate. The advertised rate represents the interest you pay solely on the loan amount, whereas the comparison rate encompasses the advertised rate along with the primary fees, including upfront and ongoing charges, calculated over a 5-year, $30,000 loan. When evaluating your loan options, consider both rates to gain a comprehensive understanding of the overall cost of your car loan.
Rate typeThere are two interest rate types: fixed rates or variable rates. With a fixed rate loan, your repayments will be the same throughout the life of the loan, which could make budgeting more manageable. If you choose a variable rate, however, the rate can fluctuate based on the market during the loan’s term, meaning your repayments could potentially increase or decrease.
Loan typeChoose between a secured car loan, in which the vehicle is used as collateral on the loan, and an unsecured car loan. Lenders will typically charge higher interest rates for unsecured car loans because they regard them as riskier than secured car loans.
Loan termA shorter loan term (1-3 years) may mean higher ongoing repayments but less interest charged overall, while a longer loan term (4-7 years) will mean lower ongoing repayments but greater interest charged overall.
FeesFees typically include the following:
  • Application fees, also known as upfront fees
  • Establishment fees
  • Account-keeping fees, such as monthly fees or ongoing fees
  • Early repayment fees
  • Early exit fees
  • Redraw fees
FeaturesSome car loan lenders offer helpful features including:

Ability to make extra repayments - Make additional repayments on top of your regular repayments so you may save money on interest and paying your loan off faster.

Redraw facility - Having a loan with a redraw facility means you may draw down on any additional payments you have made, which can come in handy if you need to access some extra cash down the track.

Who offers the best car loan?

If you’re looking for a loan to purchase a car, you might consider going with the cheapest car loan, assuming it is the best choice. However, a low interest rate doesn’t necessarily equate to a cheap or suitable loan for your circumstances.

Lenders often charge various upfront and ongoing fees that could significantly increase the overall loan cost. Further, a loan with a slightly higher interest rate may come with valuable features, such as the option to make extra repayments without any penalties. This flexibility could help you pay off your loan sooner, potentially saving you more money in interest compared to a car loan with a lower interest rate but no option for extra repayments.

The best car loan is the car loan that best suits your financial situation and car goals. There are dozens of car loan providers in Australia, and you shouldn't assume your current bank will offer you the lowest interest rate or the most suitable loan for you. Moreover, it’s important to consider factors beyond interest rates when comparing loans to make an informed decision based on your specific needs and goals.

Shopping around and making car loan comparisons is a key part of the process, and RateCity allows you to compare car loans by costs and features with its helpful tools, which considerably reduces the time it takes for you to do your research.

Comparison tables

When exploring car loan options, comparison tables serve as an excellent starting point. These tables facilitate a like-for-like comparison, enabling you to make an accurate assessment. To begin, input the desired loan amount and term, and then narrow down your options by filtering the features listed in the table above. This way, you can effectively compare multiple factors such as interest rates, monthly repayments, and Real Time RatingsTM score, side by side, to determine the most suitable choice.

Repayment Calculator

Once you have a short list of car loan options, you may want to see how they stack up against your budget. One way to do so is to use RateCity’s Repayment Calculator, which allows you to enter in a car loan’s details and repayment frequency to see how much loan repayments potentially may be.

Real Time RatingsTM

Real Time RatingsTM is RateCity’s world-first rating system that ranks personal loans based on your individual requirements. Unlike other comparison pages which rank their products once or twice a year, Real Time RatingsTM results are calculated live, so they are as up to date as possible. Each car loan is given a score out of five, based on loan costs and flexibility. Real Time RatingsTM may help you to narrow down your shortlist of car loan options.

This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

Frequently Asked Questions

What is a car loan?

A car loan, also known as vehicle finance, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Car loans can be used for both new and used vehicles.

How do you get a car loan?

There are four different ways you can get a car loan. You can go straight to a lender. You can get a finance broker to organise a car loan for you. You can get ‘dealer finance’ – which is when the car dealer organises a car loan for you. Or you can organise your own car loan through a comparison website, like RateCity.

Whichever method you choose, you will need to provide proof of identification, proof of income and proof of savings. So you may be asked for any combination of passport, driver’s licence, bank statements, payslips, tax returns and utility bills. You might also be asked to provide proof of insurance.

What are repayments?

Repayments are the regular payments you make to pay off your car loan. Repayments generally occur on a monthly basis, although many lenders will also give you the option of making fortnightly or weekly loan repayments.

How much can I borrow with a car loan?

There’s no set number. That’s because borrowing capacity differs from person to person, as well as lender to lender.

Lenders don’t give out car loans unless they’re confident they’ll be repaid. Each person is different, so the amount of money one person can successfully borrow will differ from another person’s number. Also, each lender uses its own formulas to calculate borrowing capacity – so Mr & Mrs Smith might find that while Lender X will give them a car loan for $20,000, Lender Y will offer only $18,000.

How to find a great car loan

Historically, finding a great car loan would require excess research ranging from visiting an excess of websites or making phone calls, but technology has moved on. Using RateCity, Australia’s leading financial comparison service, you can check out great deals from a range of lenders on the one site.

To start, select the amount you want to borrow and the length of the loan, narrowing your search to show just fixed or variable interest rate results.

Once you’ve indicated your search criteria, you’ll see an immediate list of lenders, ranked by interest rate or application fees. You’ll also be able to view the monthly repayment amount for each result, helping you to know what you can afford.

Up to six products can be compared side-by-side, complete with more information about each car loan, giving you more information about your options.

When comparing your car loan options, it’s ideal to keep in mind some points find a great car loan for your needs. Consider the following:

  • Choosing a low interest car loan can reduce costs
  • Selecting an option with low fees and charges is ideal, because these can really add up
  • Be aware of penalties, such as early exit penalties if you pay off the loan sooner than expected
  • Consider the features that best suit your situation

There are many ways to ensure that you get a great car loan. Ultimately, you’ll end up with the best deal by doing your research and selecting the most suitable product for you.