Compare green & EV car loans

A green car loan is a type of car financing specifically for eco-friendly vehicles. Lenders may define green car loans differently, but it’s generally accepted that eco-friendly vehicles are cars that produce less carbon dioxide emissions than traditional fuel-powered cars. Lower carbon emissions typically reduce a car’s impact on the environment.

Green car loans are relatively new to the Australian personal lending market, and indicate a growing interest in sustainability. However, because it’s a newer concept, not every lender provides dedicated green car loans. This may change as Australia moves towards an electric future. For example, Bank Australia intends to cease funding car loans for petrol cars from 2025, and the ACT state government banning the sale of new petrol cars from 2035.

When comparing green car loan options, ensure you ask the lender for information about how it determines a vehicle to be ‘green’ or ‘eco’ and how it contributes to emissions reduction and environmental responsibility. 

Green car loans work in much the same way as standard car loans:

1. First, you'll need to compare your lending options and choose a suitable loan provider that will lend you the money to purchase your green vehicle.
2. Then, you'll repay the borrowed amount, plus interest, in regular instalments over a predetermined period of time (the loan term).

Not only might investing in a low-emissions vehicle allow you to reduce your carbon footprint and minimise your contribution to climate change, it could also save you money on finance.

That's because green car loan interest rates tend to be more competitive than standard car loan interest rates, as lenders incentivise borrowers to make sustainable choices. In addition to lower rates, the lender may waive certain fees on the car loan. 

But keep in mind, the interest rate discount and the fees waived will vary depending on the lender, so it's important to compare your options.

To find out how much you could save by going for a green car loan, check out RateCity’s Car Loan Calculator.

Green cars aren’t limited to only hybrid and electric vehicles (EVs). They can also be new cars that have lower CO2 emissions than a comparable make and model. Some of the types of green cars that may be eligible for a green car loan include:

• Battery electric vehicles (BEVs) - Commonly referred to as simply 'electric vehicles', BEVs are exclusively powered by electricity. They must be plugged into an energy source to be recharged.
• Hybrid electric vehicles (HEVs) - HEVs are a type of hybrid car that are powered by a combination of petrol and electricity. They don't need to be plugged in to be charged, as the battery pack is charged by the engine when driving.
• Plug-in hybrid electric vehicles (PHEVs) - The other type of hybrid vehicles, PHEVs, are also powered by a combination of petrol and electricity. However, as their name suggests, they can be plugged into an energy source to be recharged.
• Low-emission vehicles - Certain makes and models of newer cars may be classified as low-emission vehicles despite being powered exclusively by petrol.

Check your preferred green car loan provider's lending criteria to see if the car you're interested in is eligible for a green car loan, or consider taking a look at the Australian Government's Green Vehicle Guide.

Not all green cars will come with added costs. But if you're buying an EV you'll likely want to install a home charging station. You may be able to charge your EV using a normal power point and the car’s supplied charging cable, but this may not be the fastest or most efficient way to charge the vehicle. The most efficient way for you to charge your BEV or PHEV is at home while you sleep, as it's unlikely you'll need to disrupt the charge to use your car during this time.

According to the NRMA, purchasing a dedicated wall charger for your home could cost anywhere from $1250 and $2200, plus labour – get quotes from electricians to compare prices. You may be able to take out a green personal loan to help with the cost if you come up short.

• Secured vs unsecured loan - Car loans, particularly those taken out for the purchase of newer vehicles, are most commonly secured by the car itself, which can help lower the interest rate. However, you may be able to purchase a green car with an unsecured personal loan, so you don’t risk losing your car as collateral, though the interest rate may be higher.
• Fixed or variable interest rates - The loan's interest rate will determine how much you pay in total interest charges. Fixed interest rates will stay the same throughout the life of the loan, while variable rates can fluctuate with the market.
• Fees - Some of the types of fees you may be charged on your loan include upfront fees, early repayment fees, exit fees, monthly fees and/or other ongoing fees.
• Comparison rates – To quickly get an idea of a loan’s overall cost, take note of its comparison rate, which factors in the interest rate and standard fees.
• Extra features - Some lenders may offer extra features such as the option to make extra repayments, and the ability to withdraw those extra repayments with a redraw facility.
• Loan term - The loan term is the length of time you have to pay off the loan. Car loans tend to have loan terms of three to five years, but often you may find longer or shorter terms are available. The longer the loan term, the cheaper the repayments, but the more you'll likely pay in interest charges.

An important part of your green car loan comparison is weighing up the pros and cons, so you can be confident you're making a decision that's right for you. Here are some that may be worth considering:

Before submitting a loan application for a new car loan, be sure to check the lender's eligibility criteria and product disclaimers, and consider reaching out to the lender directly with any questions you may have about your personal financial situation.