Get instant and personalised car finance rates

Currently, the average interest rate for a car loan in Australia is 7.06%, and this rate is generally higher for used car loans at 7.89%. However, borrowers may be able to obtain lower interest rates on car loans for electric, hybrid, or low-emission vehicles, with the average interest rate for dedicated green car loans sitting at 6.12% p.a.

Here is an overview of some of the most common repayment options and rates for car loans:

1. Fixed interest rate: A fixed interest rate is a rate that stays the same for the duration of the loan term. This means that your repayments will be the same amount each month. Fixed interest rates for car loans in Australia typically range from 2.99% to 10.99% for secured car loans, and up to 15% for unsecured car loans.
2. Variable interest rate: A variable interest rate can change over the loan term, which means that your repayments may increase or decrease over time. Variable interest rates for car loans in Australia are 14.41%.
3. Balloon payment: A balloon payment is a lump sum payment that is due at the end of the loan term. This can help to lower your repayments during the loan term, but you will need to have the funds available to make the balloon payment at the end of the loan. Balloon payments for car loans in Australia typically range from 20% to 50% of the loan amount.
4. Secured vs. unsecured: Car loans can be either secured or unsecured. A secured car loan requires the borrower to use the car as collateral for the loan, while an unsecured car loan does not require collateral. Secured car loans generally have lower interest rates than unsecured ones, as they pose less risk to the lender.
5. Repayment terms: Car loan repayment terms typically range from 1 to 7 years. Shorter repayment terms usually result in higher repayments, but less interest paid over the life of the loan. Longer repayment terms usually result in lower repayments, but more interest paid over the life of the loan.

What to Consider Before Acquiring a Car Loan

Comparison Rates

Comparison rates are an important factor to consider when acquiring a car loan. A comparison rate takes into account both the interest rate and any fees or charges associated with the loan and expresses this as a single percentage figure.

When comparing car loans, it’s important to compare the comparison rates rather than just the advertised interest rates. A low-interest rate may not necessarily mean a low overall cost if the loan also includes high fees and charges.

Interest Rates

The interest rate determines how much you will be paying back in addition to the principal amount borrowed. It’s important to shop around for the best interest rates available and compare them with different lenders.

Additionally, keep in mind that the interest rate you receive may depend on factors such as your credit score, the age and condition of the vehicle, and the loan term. You can choose between a fixed or variable interest rate, depending on your preference and financial situation. Fixed interest rates remain the same throughout the loan term, while variable interest rates may change depending on market conditions.

Application Fees

These fees can vary significantly from one lender to another, so compare them carefully. Some lenders may charge a flat application fee, while others may charge a percentage of the loan amount.

Some lenders may waive the application fee altogether particularly if you have a strong credit history. It’s important to factor in any application fees when calculating the total cost of the loan and determining whether the loan is affordable for your budget.

Other Fees

Reviewing the fees and charges associated with the car loan is important as these can significantly impact the overall cost of the loan. Common fees include establishment fees, ongoing fees, early repayment fees, and late payment fees.

Some lenders may offer loans with low-interest rates but high fees, so understanding the overall cost of the loan is a must before making a decision.

Repayments

This includes the length of the loan term, the frequency of repayments, and the flexibility of the loan.

A longer loan term will generally result in lower repayments, but it may also mean paying more interest over the life of the loan. Additionally, more frequent repayments, such as weekly or fortnightly rather than monthly, can help you pay off the loan faster and save on interest.

Flexibility is also important, as you may want to make additional repayments or pay off the loan early without penalty. Some loans may offer repayment holidays or other flexible features to help you manage unexpected expenses or when financial difficulties arise.

Loan Terms

This refers to the length of time you have to repay your car loan. Typically, car loans have loan terms of one to seven years. A longer loan term means you will be given lower monthly repayments, but it entails paying more interest over the life of the loan. On the other hand, a shorter loan term will have higher monthly repayments, but you will pay less interest overall. So make sure to choose a loan term that suits your financial situation and budget.

Loan Conditions

Loan conditions refer to the specific terms and conditions of the car loan that you will be required to meet. Make sure to carefully review and understand the loan conditions before acquiring a car loan, as they can impact the total cost of the loan and your ability to make repayments. Some important loan conditions to consider include:

1. Repayment frequency: How often are you required to make loan repayments? This may either be weekly, fortnightly or monthly.
2. Early repayment penalties: Does the lender charge a penalty fee for making early repayments or paying off the loan early? If so, this could impact your ability to save money on interest overtime.
3. Late payment fees: Does the lender charge a fee for late repayments? If so, you should also factor this into your budget and ensure you can make repayments on time.
4. Security requirements: Some lenders may require you to provide security for the loan, such as the car or other assets.
5. Loan insurance: Some lenders may require you to purchase loan insurance, such as a comprehensive car insurance to protect the loan in case of default. This should also be taken into account when calculating the total cost of the loan.

Choosing Between a Secured or Unsecured Car Loan

A secured loan could be a wonderful loan choice for anyone looking to buy a newer car. A secured loan is one in which you offer ‘collateral’ (such as the car itself) to provide additional security to the loan provider if you fail to repay the money you borrowed within the agreed timeframe. Because you’ll have to use your new car as collateral, they often have lower interest rates than unsecured loans.

If you’re considering purchasing an older vehicle, an unsecured loan might be the best option. Unsecured loans don’t require any kind of security. Instead, the lender will base their decision to approve the loan on affordability. You won’t have to put up any collateral, but you may end up paying a higher interest rate.

Eligibility Requirements for Car Loans

You must fulfil the following criteria to be eligible for a car loan:

• At least 18 years old
• A permanent citizen of Australia
• Have a stable source of income.
• A working phone number and email address
• An active bank account

Please note that the eligibility for loan applicants will vary depending on the lender. Meeting the eligibility requirements also does not guarantee loan approval as lenders will need to consider other factors such as your debt-to-income ratio, employment history, and other financial obligations.

Car Loan Application Process in Australia

What to expect during your car loan’s pre-approval

During the pre-approval process, you may be able to negotiate the terms and conditions of the loan, such as the interest rate, loan term, and fees. This can help you to find a car loan that suits your budget and financial goals.

Once you have been pre-approved for a car loan, you can start looking for a vehicle within your budget. When you have found a car that you want to purchase, you will need to provide the lender with the details of the vehicle, such as the model and registration number.

The lender will then do a valuation on the vehicle to ensure that it is a suitable security for the loan. If the valuation is satisfactory, the lender will provide you with the loan contract to sign and the funds will be transferred to the seller.

Important Note: Pre-approval does not guarantee your loan approval, and the final loan terms and interest rate may be different from those provided during the pre-approval process. Also, each lender may have a different car loan application process, so remember to clarify all specific details first before pushing through with your application.

What are the needed documents or requirements?

The specific documents and requirements needed for a car loan application in Australia may vary depending on the lender and the type of car loan you are applying for. But general requirements usually include the following:

1. Personal identification documents, such as your driver’s license or passport.
2. Proof of income, such as payslips or bank statements.
3. Details of your employment, including your employer’s name and contact details.
4. Information about the vehicle you are purchasing, including the make, model, year, and registration details.
5. Your credit history, which the lender will usually obtain through a credit check.
6. Details of any other assets or liabilities you have, such as other loans or credit card debts.

It is best to check with the specific lender you are considering to confirm the exact documents and requirements they need for a car loan application.

How long is the application process

The length of time it takes to complete a car loan application in Australia can vary depending on the lender and the individual circumstances of the applicant. In general, the application process can take anywhere from a few minutes to several days.

Many lenders offer online application processes, which can be completed quickly and easily. Once the application is submitted, the lender will review it and may request additional documentation or information if needed. The length of time it takes to receive a decision on the loan can also vary depending on the lender, but many lenders will provide a decision within 24-48 hours.