Compare used car loans

A used car loan is a type of personal loan that helps you buy a second-hand car over a certain age. When you take out a used car loan, the loan provider will lend you the money you need to cover the purchase price. You'll then repay the loan amount, plus interest and fees, in regular instalments over a predetermined period of time. 

Whether you're looking to upgrade your current ride or purchase your first car, a used car loan may offer an affordable solution. These loans allow borrowers to spread out the cost of the vehicle over a set period, typically 1-5 years.

As used vehicles can be more affordable, a used car loan can be a convenient way for Australians to finance their car purchase - whether that is a pre-owned hatchback for the city, a SUV for a growing family, or a practical yet comfortable ute. 

A used car is, as the name suggests, designed to be used to buy a second-hand vehicle. A used car loan is not available for new model purchases. New car loans are generally available for purchases of vehicles between three to five years old. If the car you want to purchase exceeds a lender's restrictions around vehicle age limits, you may need to opt for a used car loan.

In most cases, used car loans come with limits on the maximum age of the vehicle being purchased, typically from 10 to 15 years. Lenders impose these restrictions to ensure that the car you're purchasing will remain functional throughout the duration of the loan.

It's important to note that if you are considering a longer-term loan, such as a five-year car loan, certain lenders may decline your application if the vehicle you intend to buy is already four years old. In this scenario, by the time the loan term concludes, the car would be nine years old, potentially falling outside the acceptable age range set by the lender.

There are a range of factors that make up a used car loan - some of which may suit one borrower but not the next. This is why it's crucial that you take the time to compare used car loans carefully to ensure you're choosing the best option for your financial situation and budget. Here are some of the most important factors to compare:

Interest rates

Car loan interest rates determine how much you will pay in interest charges over the life of the loan. Carefully consider your financial situation and long-term goals when deciding between fixed and variable interest rates for a car loan. 

If you opt for a fixed interest rate, your interest payments will remain the same throughout your loan term. Fixed rates may provide stability and predictability, which may better suit those who prefer a consistent monthly budget, or those concerned about potential rate hikes.

If you choose a variable rate, it may fluctuate over time in line with the market, or at the lender's discretion, but it's more likely to come with features. As a result, fixed rates may help make budgeting more manageable, but variable rate loans may offer more flexibility.

Helpful features

Some of the extra features that may be available on certain loan products include:

• Extra repayments - You may be able to make extra repayments on top of your regular repayments to pay down your loan faster.
• Redraw facility - This allows you to withdraw any extra repayments you've made if you need to.
• Flexible repayment options - You may be able to choose between making weekly, fortnightly or monthly car loan repayments.
• Balloon payments - More commonly offered when buying a new car, a balloon payment allows you to reduce your regular repayments by making a large lump sum payment at the end of your loan term.

Fees

The types of fees you may be charged tend to vary from one lender to the next, but may include:

• upfront fees like application fees
• ongoing fees like annual fees
• early repayment fees
• late payment fees
• redraw
• early exit fees

Secured vs unsecured loans

A secured loan is guaranteed against the value of an asset which is used as collateral if you default on your loan. Car loans are one of the most common forms of secured personal loans, as the car itself can be used as security. Secured car loans will generally have lower interest rates than unsecured car loans, as they are deemed less of a risk to lenders.

Many car loans are secured loans, with the vehicle used as collateral. Unsecured car loans are also available, but it is likely that their interest rates and fees will be comparatively higher. 

Loan term

The loan term is how long you agree to pay back the loan plus interest. Car loan terms are typically between one to five years. For used cars, the car’s age might affect how long you can have to pay back.

Longer loan terms often mean lower monthly payments, but paying more interest overall. Shorter terms might have higher monthly payments, but you pay less interest during the whole loan. It's worthwhile calculating how much you would pay each month for different loan terms to see how they may suit your budget before you actually apply for the loan.

There are benefits and disadvantages to both new and used vehicles, so whether it's better to buy used or new will ultimately depend on your personal circumstances.

Benefits and risks of used vehicles

Buying a used car comes with several considerations and expenses that are important to keep in mind when you're shopping around. 

You'll need to account for ongoing car ownership costs in your budget, such as:

• Registration
• Petrol
• Tolls
• Maintenance and repairs
• Insurance, including CPT insurance

There is also always the risk of having to repay a car loan even if the car stops working, or is written off. If your used car is no longer driveable, you will still need to meet your car loan repayments with the lender. It might be worth looking into insurance that could help cover you in this situation.

You’ll also need to keep your used car’s depreciation rate and potential resale value in mind. All cars, new or used, experience depreciation, which is the decrease in value over time. While used cars typically depreciate more slowly than new ones, and some models retain value better than others, it's still a factor to consider when choosing your vehicle if you plan to sell the car in the future.

Looking for your perfect car loan may feel like searching for a needle in a haystack. Luckily, RateCity has a number of comparison tools that may take the hassle out of the process.

Comparison tables

RateCity's comparison tables (like the table on this page) allow you to compare apples with apples by easily viewing loan options that match your needs and goals. Simply use the filters to narrow down your search to the loan products that best suit your requirements. You'll then be shown a range of options side by side, so you can easily compare repayment costs, rates and features. 

Comparison rates

Low rates can sometimes come with high fees, so it's important to consider both. This is where comparison rates come in. Comparison rates are based on the interest rate as well as the cost of many ongoing fees, and can help you get a better idea of the total cost of the loan. A comparison rate is based on a $30,000 car loan on a five-year term. While a comparison rate may not cover every fee, it's one way to gauge how costly a loan truly is. If, for example, a car loan has a comparison rate 1-2% higher than its advertised rate, you may assume the loan comes with costly fees.

Car loan repayment calculator

RateCity's car loan repayment calculator can give you an estimate of how much your monthly repayments may cost based on your preferred borrow amount, interest rate and loan term. It can also provide you with an estimate of the total cost of the loan and total interest payable. This is a helpful way to narrow down your shortlist of car loan options, based on how they will impact your household budget.

Real Time Ratings™

Real Time Ratings™ is a world-first rating system that ranks car loans based on your individual lending requirements. It gives each car loan a score out of five stars, based on loan costs and flexibility. Take note of the star rating of each car loan, and consider using this as a benchmark of what may be a competitive car loan, and what may not be. You may want to use the Real Time Ratings™ score as a way to further narrow down your car loan shortlist of options.