Car loans for pensioners or those who are retired can be hard to come by. But it's not impossible.
Your loan application might be handled on a case-by-case basis and different lenders will have different eligibility criteria, but you should still be able to apply for a car loan.
In fact, according to our research, only 0.57% of 60 to 78-year-olds have ever been rejected for a car loan1.
Car loans for pensioners: Where to start?
Just getting started? Take a look and see whether you can get a loan with a pension or Centrelink payments.
Can I get a car loan if I am retired or on a pension?
Yes. You don’t have to be working to get a car loan, as long as you still have some kind of income, such as income from investments or other assets, Centrelink payments, a disability pension, age pension or another kind of pension.
However, your range of options will generally be more limited than someone who is still in full-time employment. To save time and avoid application fees, you’ll want to make sure you're eligible for a loan before applying.
Two approaches to getting your car loan.
1. Check borrowing power, find car. Knowing how much you can borrow first can help your search if you’re not sure what you want to look for. You can apply for pre-approval for a car loan so you know the amount you’re working with.
2. Find a car, find a loan. This will often help you save money overall, because you might end up borrowing less, having lower repayments and finding a more competitive offer.
Whichever option you choose, you will need to understand your eligibility criteria and make sure you have a good credit score.
How do car loans work if you're retired or receiving Centrelink benefits?
Car loans will work in the same way regardless of whether you have an employment income, you’re retired or you’re receiving Centrelink payments. The biggest factor is demonstrating that you can keep up with your repayments.
A lender will look at how much you earn from your pension, any Centrelink payments or other income, then compare it to the repayment amounts.
This means your application is generally much more likely to be accepted when you’re borrowing smaller amounts.
You could look at buying a used car rather than a new one and putting your savings towards the cost of the car so you don't need to borrow as much. But there are some great lower-priced new car options too!
Is a car loan right for me?
Car loans will usually have minimum loan amounts of between $3,000 to $10,000. If you only need a few thousand dollars for a car you’ve got your eye on, you might want to consider a personal loan.
Car loans come with the option of being secured, which will lower rates. However they can also come with restrictions on the type of car you're buying and typically require you to have found the vehicle you want to buy before you apply.
Personal loans don't require you to put anything up as security. You can use the funds for anything you like, so you don't need to provide any vehicle details when you apply - this means you can apply before you look for a car.
"For a better chance of approval, and for better interest rates, you could consider a secured car loan. This puts the car as collateral and so reduces the risk to the lender. Bear in mind though that this means that if you can’t afford repayments the lender could repossess your car. "
What criteria will I need to meet if I'm retired or on a pension?
Applications are handled on a case-by-case basis and different lenders will have different criteria that you will need to meet to be eligible for a loan. Generally, you’ll have to be able to prove to the lender that you can keep up with repayments. This mostly involves looking at the difference between your incoming payments and outgoing expenses and seeing if your budget also has enough room to cover the cost of your repayments.
Some lenders also have specific requirements in addition to this. These are:
A car loan can be with you for a long time, often over five years, so it’s worth making a careful choice and considering the costs.
Secured or unsecured? You might be able to find better rates with a secured loan, but an unsecured loan might be less hazardous if your circumstances change and you fall behind on payments. It is generally easier to be approved for a secured loan, as it represents less risk for the lender.
What is the interest rate? Generally, the lower the interest rate, the lower the size of your repayments. However, you should also factor in any fees and charges to determine the true cost of the loan.
Fixed or variable rates? Fixed rates will stay the same over your loan term, while variable rates may change over the course of your loan. In favourable conditions, this means you may end up with a rate that decreases during your loan, but you also risk rates rising and having to pay more for your loan. If you’re on a pension, a fixed rate loan may be more suitable than a variable rate loan as it provides certainty around the size of your repayments.
What are the fees and charges? If you’re not sure you’re eligible for a loan, you might want to watch out for high application fees. Generally, fewer and lower fees are better, but you might find a loan that offers more value for money in the long run, at the cost of higher initial fees.
How much can I borrow? What are the minimum and maximum amounts you can borrow with different loans?
How long is the loan term? How long will you be making repayments? You will generally pay more in interest over a longer loan term, but the size of your regular repayments will be smaller. Lenders will also generally offer better rates to those who can pay off the loan in a shorter period of time.
When you apply for a loan, a provider might suggest loan terms to suit your financial situation. For example, a car loan for pensioners might be more likely to come with a longer repayment period and as a secured rather than an unsecured loan.
What if I have bad credit?
If you're a pensioner with bad credit, it's still possible to get a car loan, although your options may be more limited. You're more likely to be approved for a secured car loan, as this type of loan represents less of a risk for the lender. If you fail to make your repayments, the lender can take ownership of the vehicle to cover the cost of the loan.
You will also generally receive a lower rate on a secured car loan than on an unsecured loan, which means you may be more likely to make your repayments. However, many lenders now offer personalised interest rates based on your financial history and credit score. If you have bad credit, you may be offered a higher rate than someone with good credit.
How to apply for a pensioner car loan
It’s important to make sure you fully understand all the terms, conditions and obligations before signing up for a loan.
You can compare car loans in the table below and select different loan amounts and repayment periods to see how much you’ll be paying back each month. This can help you work out whether you’re going to be able to keep up with repayments and whether your application might be accepted by different providers. It can also help you put the interest rates in more concrete terms and work out how much you’ll be repaying per month.
Once you've found a loan that is right for you, you can apply by clicking "Go to site" and following the instructions. You will generally need to provide personal and financial information as part of your initial application, as well as proof of your pension and other income, assets or liabilities.
Rebecca Pike is Finder's senior writer for money. She joined Finder after almost four years writing for business publications in the mortgage and finance industry, including three years as editor of Mortgage Professional Australia. She regularly appears as a money expert on programs like Sunrise and Today, as well as across radio and newspapers. She also holds ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products. See full bio
Rebecca's expertise
Rebecca has written 201 Finder guides across topics including:
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Retired with age pension and small pension from working in UK. Have very good credit rating. Require car loan, not necessarily new car but has to be from reliable seller. Have house here owned and valued $680-$690.000. What is the best way to go about this please.
Finder
JohnAugust 11, 2018Finder
Hi Christina,
Thank you for leaving a question.
The best course of action would be to get a pre-approved car loan so you have an estimated budget for the car you want to purchase. Once you are approved for the loan then you can visit any of the local car dealerships that can give you a good offer based on the amount you got approved for. As an addition, you may also visit a quick checklist of what you need to look at when buying a used car from our used car guide.
Hope this helps!
Cheers,
Reggie
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Retired with age pension and small pension from working in UK. Have very good credit rating. Require car loan, not necessarily new car but has to be from reliable seller. Have house here owned and valued $680-$690.000. What is the best way to go about this please.
Hi Christina,
Thank you for leaving a question.
The best course of action would be to get a pre-approved car loan so you have an estimated budget for the car you want to purchase. Once you are approved for the loan then you can visit any of the local car dealerships that can give you a good offer based on the amount you got approved for. As an addition, you may also visit a quick checklist of what you need to look at when buying a used car from our used car guide.
Hope this helps!
Cheers,
Reggie