The majority of new car loan products are secured loans, meaning the lender has the right to repossess the vehicle if you default on your loan. While this is a steep price to pay, it also means you get a lower interest rate. Getting a new car loan doesn't mean you have to buy a car from a dealership – the majority of lenders will accept a vehicle up to two years old from a second-hand car dealer or a private sale.
When you apply, you and your car will need to pass the eligibility criteria. Depending on how strict the lender is, you may need to use the entire loan amount on the car, although some lenders may allow you to borrow some extra money to cover the costs that come with buying a new car. You will need to repay the loan over the pre-agreed loan term.
With a secured car loan, the bank is able to use the new car as security. That means it has a registered interest in the car and can repossess it if you default on your payments. The interest rate is lower than the rate you would get with an unsecured loan because a lender views it as less risky.
An unsecured car loan works a little differently, as the bank or loan company does not hold the new car you are purchasing or any of your assets as security. If you fail to make your personal loan repayments, the bank has little power to do anything about it, except send reminders. When you've consistently lapsed on repayments, it will send a debt collector to try and obtain the money. Your assets are safe, but the lender could take you to court. In response to the increased risk taken on by the lender, the interest rates are raised when compared with a secured loan.
If your credit report isn't quite as stellar as you'd like and you still want a new car, you should consider a bad credit secured car loan. These loans come with a higher interest rate due to the increased risk factor.
| Response | WA | VIC | SA | QLD | NSW |
|---|---|---|---|---|---|
| No | 56.78% | 67.58% | 54.67% | 53.68% | 60.4% |
| Yes | 43.22% | 32.42% | 45.33% | 46.32% | 39.6% |
A variable rate means the interest rate can fluctuate. Over the length of your loan your rate might go up or down (or both) depending on market interest rates. This means the repayments you're making at the start of your loan could change, and you need to be sure that you could meet your repayments if rates were to increase.
Fixed rate loans are usually a bit higher than variable rates, but you know that your repayments won't change throughout the loan term. If rates increase over the next few years, the fixed rate may end up being lower than the resulting variable rate. It's more common to find fixed rate car loans.
Compare interest rates and find the lowest option. Your interest rate will be personalised according to your credit history.
Car loan application and monthly service fees can cost you hundreds of dollars.
You can get out of debt faster and save money with a loan that lets you make penalty-free extra repayments. A redraw facility lets you pull out those extra repayments to spend in an emergency.
Also known as loan term, this is how many years it will take to pay off your loan. A longer loan term makes your monthly payments cheaper, but you’ll pay more interest all up.
Finder not only helps you find and compare new car loans, but we also have vehicle comparisons. If you still aren't sure about which car you are going to purchase, read our car reviews and compare models against each other.
| Bank loan | Car dealership |
|---|---|
| Interest rates won't have a dealership markup. | Dealerships will handle all the paperwork for you. |
| You can get pre-approval so you know the budget you're working with. | They are more likely to consider bad credit applications. |
| You'll have to do the paperwork yourself. | They may advertise more attractive interest rates, but there's a catch... |
| Loans are less likely to have balloon payments. | The catch is that they typically come with residual or balloon payments, where you have to fork out a hefty lump sum. |
Finder's Consumer Sentiment Tracker shows that on average Australians are carrying approximately $11,987 through their car loan in 2023.
Meanwhile, the latest ABS figures show that new vehicle lending is currently just under $1.5 billion, as of April 2024, increasing from just over $1 billion 12 months before.
The ultimate guide to getting the best price for your trade-in.
Checking a car's service history can help you avoid major issues when you buy a used car. Here's how it works.
Want to buy a classic car but don't have the ready money? There are still financing options available for classic vehicles. Find out what loans you have to choose one and which one will work best for you.
There's a way you can drive with Uber without using your own car – find out how.
Find out how you could rent a car to drive with Uber in Canberra
Find out the extent of Australia's Tesla Supercharger network with our complete map of every charging station.
If you are unhappy with your current car loan, refinancing it could be the right choice for you. Most people refinance their car loan to get a lower interest rate, get more flexibility in their car loan or get more additional features. Read our guide to see if it's right for you.
The best car loan isn't necessarily the one with the lowest rate. Learn how to spot the best car loans and compare 15+ car loan products with Finder.
Don't pay an outrageous interest rate on your next car loan – compare loans before you buy.
Finding the right car loan shouldn't be as hard as finding the right car. Get a loan that will give you pre-approval so you can go shopping with the right amount of funds.