Car Loans

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Updated on 22 June, 2022

Is it time for a set of new wheels: a BMW, AUDI, Infinity, or just a clunker to get you from A to B? If this is the time to hit the road, you may need a car loan.

However, there are myriad car loans available from multiple providers, so choosing the right one isn’t so easy.

It is therefore extremely important and highly beneficial to thoroughly compare offers to find the right one for your needs and budget.

InfoChoice can help you compare over 99 car loan products and our comparison table helps you sort through car loan offers from a variety of lenders at a glance by detailing the maximum cost and minimum monthly repayments, as well as any fees you might incur.

“Sponsored” products are displayed first within the search results pages and can be re-sorted without this filter by de-selecting the “Show sponsored listings first” checkbox. For more information on how we’ve selected these “Sponsored” and “Featured” products click here. The default sort is based on lowest monthly repayment.

The comparison rates in this table are based on a loan of $30,000 and a term of 5 years unless otherwise indicated in the product name with^, in which case, the comparison rate is based on a loan of $10,000 and a term of 3 years. The comparison rates are for unsecured personal loans only for the relevant amounts and terms. The comparison rates for car loans and secured personal loans are for secured loans unless indicated otherwise. WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Comparison rates are not calculated for revolving credit products.

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What is a car loan?

A car loan is a personal loan taken out by people who are looking to purchase a vehicle but don’t have enough money to do so. A car loan can be used for both new and used cars.

With a car loan, regular repayments will need to be made over a fixed amount of time. These repayments include the interest owed per month, as well as a portion of the principal (the amount you borrowed). These repayments continue until the loan is paid off.

Car loans can range in price anywhere from $5,000 to $100,000 and can last from one-to-10 years. For secured car loans, interest rates vary between 2.99% and 10% and for unsecured loans it can be up to 15%. If you are using your car as security, your interest rate might be lower than if you were taking out the loan on an unsecured basis.

Steps to getting a car loan?

A car loan is a formal finance arrangement, usually undertaken between three parties: the person buying the car, the person selling the car (referred to as a vendor and is usually from a car dealership), and the lender.

There are six steps involved in securing and paying off a car loan:

1. Search online and compare car loans. Find one that suits your needs.

2. Apply for the loan.

3. If approved, the lender will agree to lend you a specific amount to buy a vehicle.

4. A purchase agreement must be signed with the vendor.

5. The lender pays the vendor on your behalf.

6. You repay the lender, usually over a period of one-to-10 years.

How much can I borrow?

Your borrowing capacity will depend on a number of things such as your income, expenses, assets and any other debts you have. Lenders will also check your credit history to make sure you will be able to repay the loan. If you have a poor credit history due to defaulting on payments, the lender may choose to offer you a smaller amount for your loan. In some cases, they may choose to decline your application altogether.

If you are after a secured loan, the amount you will receive can only be the same as the security you have offered. If you default on a car payment, the lender can choose to sell your security, in order to make up for the money you have borrowed.

If you are purchasing a used car, the lender might not give you as much as they would for a new car.

Once you know the amount you would like to borrow, a car loan calculator can help you determine how much your repayments will be.

What other costs are involved on getting a car loan?

When applying for a car loan, don’t just apply for the amount of purchasing the car. There are many other costs involved in buying a car. You may need to borrow more than you think just to cover these costs.

Extra costs include:

  • Stamp duty
  • Registration
  • Car insurance
  • Petrol costs
  • Regular services, maintenance and repairs
  • Road tolls

Comparing car loans

When comparing car loans make sure to compare them with a similar product. For example, compare secured car loans with other secured car loans.
You also want to consider the interest rate along with any features you may need.

Here are the most important things to compare:

1. Interest rate
Knowing the interest rate, is the first step to comparing any loans. Loan interest rates have two parts to them: the advertised rate (the interest you pay on the loan) and the comparison rate (this is a combination of the advertised rate and any fees). Compare both when deciding on a lender.

2. Fixed or variable rate
If you choose a fixed rate, you know that your repayments will be exactly the same month- to-month. This makes it easier to budget and manage your finances. The downside is it’s a lot harder to pay out a loan early if you want to pay out the learn earlier than the stated loan term. Choosing a variable rate will mean your repayments will fluctuate each month, depending on the current interest rate. This could mean that some months your repayments could be a lot higher than other months.

3. Fees
The fees you will be charged can add a significant amount to your loan. You may not have considered these fees, but they can have an impact. Some of these fees could include: application fees, account keeping fees, early exit fees (also known as break fees), redraw fees. Each lender has different fees.

4. Features
Car loans have all sorts of features on offer but the more features, the more fees you may be up for. Here are a few of the different features you could access.

  • Extra repayments
    Some loans will allow you to make extra repayments without any penalty fees, whereas others might penalise you. If you think you are likely to have extra money at some point and would like to make further repayments, make sure your lender offers this feature.
  • Redraw facility
    If you have managed to pay extra into your loan and would like to be able to access it down the track, find out if you if a redraw facility is available. You will only be able to withdraw any extra money that you put into that account. You won’t be able to access the money that was scheduled to be repaid.
  • Pre-approval
    Some lenders will pre-approve a loan. If you have loan pre-approval, you will have a better idea of how much you can spend on a car.
  • Loan Term
    It’s best to find a loan that will allow you to pay off your amount comfortably over a set amount of time, but that also works within your budget.
  • Loan type
    You may be allowed to select a secured or an unsecured loan. If you choose a secured loan, you will need to offer up some form of security (usually your car) that the lender can sell in case you are not able to make repayments.

Can I get a car loan?

In order to be approved for a car loan you will need to prove to your lender that you are able to make the repayments.

You will need to prove that you have a regular source of income and state how long you have been in your current job.

If you are self-employed you may have to show two years of tax returns.

Even if you don’t have a regular income, you still may be eligible for a car loan, but the lender may charge you higher interest.

Advantages and disadvantages of having a car loan

As with all loan products there are advantages and disadvantages that you neede to consider before taking out the loan.


  • You don’t have to repay your car loan in one go. You will have a certain amount of years in which to pay it off.
  • The interest rate for your car loan may be lower than other types of loans such as unsecured loans.


  • You will be required to make regular repayments, but if you fail to make repayments the lender may choose to sell the car to get their money back.
  • Your loan may have restrictions on it. Some lenders won’t let you use the money for used cars.
  • The amount you can borrow will be dependent on your income and financial situation.

What different types of car loans are available?

There are a number of ways to finance a car:

1. Secured car loan, where you use an asset as security for your loan.

2. Unsecured car loan, where you don’t have to provide any security but you might need to pay higher interest.

3. Chattel Mortgage, which is a specialist car loan for business purposes.

4. Operating Lease, which is more like a long term car rental as you don’t own the car at the end.

5. Commercial Hire Purchase, which is also similar to rent however you do end up owning the car at the end of the agreement.

6. Car lease, which is similar to a Commercial Hire Purchase but offers a few more options. When you reach the end of your agreement you can choose to return the vehicle or purchase it.

7.Novated Lease, where an employer pays for the lease of their employee’s car out of the employee’s before-tax salary.

How to apply for a car loan

Applying for a car loan is similar to applying for any loan. The application process will be easier if you have all your documents and identification prepared before you start the application process.

Here are the steps you need to take when applying for a car loan:

  • Check your credit score: Accessing your credit score before applying for a car loan will give you an understanding of how the lender will view you. The better your rating, the higher your chance of approval will be.
  • Get a budget together: If you have a comprehensive budget in place, you will know exactly how much you can afford to pay per month for a car loan.
  • Search on line and compare car loans: Compare everything from interest rates to loan features. A low interest rate isn’t the only important aspect when assessing a car loan.
  • Assess the lenders eligibility criteria: Each bank has different criteria, so make sure you are eligible for the loan you are applying for.
  • Apply online: You should be able to apply for a car loan on the lenders website. Have all your documents available to make the process quicker. Submit your application once you have completed it.
  • Wait for lender’s approval: Some lenders give an immediate response, others may take a little longer.

Ways to reduce your monthly repayments

If you want to reduce the amount you are paying each month, there are a few things you could do:

  • Borrow less: You still need to borrow the amount required for your car, but don’t borrow any more than that. The less you borrow, the less your interest will be over the term of the loan.
  • Think about a residual balloon payment: If you choose a residual balloon payment it means you pay less throughout the life of the loan. However, when you reach the end, you pay a lump sum to pay the loan out.
  • Take out a longer term loan: Spreading your loan over a longer period of time will mean your monthly repayments will be much lower.

What will I need to apply for a car loan

The following is a list of all the identification and documentation needed when applying for a car loan:


  • Driver’s licence, passport, birth certificate, Medicare card. You may need to provide two from this list.
  • Proof of income and employment: three recent pay slips, two recent tax returns if you are self-employed, employer’s contact details and employment details.
  • Assets and liabilities: what assets you own, what debts you have, details of any loans and credit cards.
  • Vehicle details: make, model, year and colour, VIN (Vehicle Identification Number), engine number, registration number and purchase price.

Compare Car Loan Rates

Time for a new set of wheels? With such a wide selection of available car loans out there, it’s important to thoroughly compare offers to find the right one for your needs and budget.

Our comparison table helps you sort through car loan offers from a variety of lenders at a glance by detailing the maximum cost and minimum monthly repayments, as well as any fees you might incur.

Car Loans FAQ

1. Can I get a car loan with bed credit?

Having poor credit doesn’t mean you won’t be able to get a car loan, but it will affect certain aspects of your loan. It may affect how much the lender is willing to give you and you may also need to pay higher interest. You can also approach a specialist lender who will be able to help you with a bad credit car loan.

You can increase your chances of being approved for a car loan by getting a secured loan where you use an asset (usually your car) as collateral.

Another option is to ask someone to be a guarantor for your car loan.

You can also talk to a broker who may be able to secure a loan for you that suits your needs on your behalf.

2. Should I choose to make a balloon payment at the end of my car loan?

Choosing to make a balloon payment at the end of your loan means your regular monthly loan repayments will be a lot lower, but you will be required to make a bulk payment at the end of the loan term.

3. What is a guarantor car loan?

A guarantor car loan is a type of loan that requires you have a guarantor on your agreement. The guarantor is a third-party individual, usually a family member or friend, who will be responsible to pay the car loan in the event that you are not able to make repayments.

There are many reasons you may need a guarantor, including if you are a student, or don’t have a regular income. Even pensioners may require one.

4. What is a loan term?

The loan term is the length of time the lender agrees to for you to repay your car loan. Car loans usually have loan terms anywhere from one to 10 years.

5. Do I have to buy through a car dealer or can I buy a car privately?

You are not restricted to buy only from a car dealer. If you would like to purchase a car from a private seller you will need to provide certain details, such as registration number and vehicle identification number (VIN) in order for the loan to proceed and be approved.

6. Can I make extra repayments on my car loan?

Some lenders will allow you to make extra repayments on your car loan without penalising you. Others may charge a fee, particularly if you end up paying off the entire amount before your term has ended. If you think you will want to make extra repayments, check to make sure you lender will allow that.

7. How do I make payments to my loan?

You can make payments via online bank transactions. This could be via BPAY, or you could organise direct debit repayments straight out of your transaction account.

8. Do I need a deposit for a car loan?

This depends entirely on your lender. Some lenders will require a small deposit whilst others might be happy to give you the full amount required for the purchase of your car. You will have more chance of not requiring a deposit if you have a good credit history.

9. Are there restrictions on the types of cars I can buy with my loan type?

Speak to your lender about what restrictions they might have. Each lender is different. Some may place restrictions on the age of a vehicle or the make and model.

10. Can I include the cost of insurance and on-road costs in my car loan amount?

Always ask your lender if they will allow you to include the insurance and on road costs in your car loan before accepting the loan.

11. How long does it take to get my car loan approved?

Receiving approval for your car loan doesn’t take too long. In many cases, you may get the result in a matter of hours. Some lenders may take a couple of days to get back to you. You can ask the lender how long approval will take at the time of applying for a car loan. The lender will be able to give you an estimate.

12. Can I get a pre-approval for my car loan?

Yes, some lenders offer pre-approval. The lender assesses your financial situation and lets you know ahead of time if you will be successful with your loan application and how much they will let you borrow. This means, you will know exactly how much you can spend on your car making your car selection process a lot easier.

13. Who can apply for a car loan?

Anyone who is 18 years or over, has a driver’s licence, is an Australian citizen or resident and has some form of income, can apply for a car loan.

14. What are car loan repayments?

Car loan repayments are the regular payments you make to pay off your car loan in full. Each repayment includes the interest accrued as well as a portion of the principal (the amount you borrowed when taking out the loan). Car loan repayments are usually made monthly, but you may be able to request weekly or fortnightly repayments.

15. Can I get a car loan if I am a student?

Yes, as long as you are over 18-years-old and an Australian resident. If you don’t have a full time, steady income, you may be required to get a Guarantor’s Loan which means someone will need to sign with you to state they will take on full responsibility for repayments if you aren’t able to make repayments.


ANCAP The Australasian New Car Assessment Program (ANCAP) provides both Australian and New Zealand drivers with vehicle safety information including star safety ratings. ANCAP is the leading independent vehicle safety organization in Australasia.
Borrowing Capacity The amount a person can borrow from a lender.
Break fee A fee incurred when a borrower pays off their loan before the term of the loan has ended.
Guarantor A guarantor or co-borrower is someone who co-signs the loan and is responsible for the loan if the primary borrower defaults.
Comparison Rate An rate designed to provide an indicative idea of the total cost of a loan.
Credit Check When a lender looks at your credit report to determine your borrowing eligibility.
Credit Score The number that is used to evaluate your creditworthiness. The higher the score the better.
Fixed Rate A fixed interest rate, means the rate remains the same for the term of the loan.
Loan Term The agreed length of the loan.
Pre-Approval Your loan is approved before your purchase.
Repayment The amount of money your repay on your loan over a designated period of time and frequency.
Security The asset you put up against the loan to minimise the lender’s risk.
Secured Loan A loan secured by an asset.
Unsecured Loan A loan unsecured by an asset, usually not required by the lender but may come with higher interest rates.
Variable Rate A fluctuating interest rate, usually determined by the cash rate set by the Reserve Bank of Australia (RBA).