car loan

Compare Car Loans

Compare a wide range of secured car loans from $10,000 to $100,000 and choose the loan that’s right for you.

Compare popular car loans with Plenti*

Brand
Interest Rate (p.a.)
Comparison Rate (p.a.)
Upfront Fees
Monthly Fees
Repayments
Money3
Money3 Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 19.95% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$0

Monthly Fees

$0

Repayments

$0 per month
ME Bank
ME Bank Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 10.98% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$250

Monthly Fees

$0

Repayments

$0 per month
Macquarie Bank
Macquarie Bank Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 6.42% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$495

Monthly Fees

$8

Repayments

$0 per month
Heritage Bank
Heritage Bank Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 5.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$200

Monthly Fees

$5

Repayments

$0 per month
Defence Bank
Defence Bank Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 5.69% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$206

Monthly Fees

$10

Repayments

$0 per month
CUA
CUA Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 6.79% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$175

Monthly Fees

$0

Repayments

$0 per month
BOQ
BOQ Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 7.39% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$195

Monthly Fees

$8

Repayments

$0 per month
Bendigo Bank
Bendigo Bank Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 7.79% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$150

Monthly Fees

$5

Repayments

$0 per month
Bank SA
Bank SA Car Loan (Variable Rate)

Interest Rate (p.a.)

from 12.74% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$195

Monthly Fees

$12

Repayments

$0 per month
Bank SA
Bank SA Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 8.49% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$195

Monthly Fees

$12

Repayments

$0 per month
Bank of Melbourne
Bank of Melbourne Car Loan (Variable Rate)

Interest Rate (p.a.)

from 12.74% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$195

Monthly Fees

$12

Repayments

$0 per month
Bank of Melbourne
Bank of Melbourne Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 8.49% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$195

Monthly Fees

$12

Repayments

$0 per month
People's Choice CU
Peoples Choice Car Loan (Fixed)

Interest Rate (p.a.)

from 5.64% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$250

Monthly Fees

$0

Repayments

$0 per month
IMB
IMB Car Loan (Fixed)

Interest Rate (p.a.)

from 5.45% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$250

Monthly Fees

$0

Repayments

$0 per month
Bankwest
Bankwest Car Loan (Fixed)

Interest Rate (p.a.)

from 7.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$299

Monthly Fees

$5

Repayments

$0 per month
Suncorp
Suncorp Car Loan (Fixed)

Interest Rate (p.a.)

from 5.49% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$175

Monthly Fees

$5

Repayments

$0 per month
RACQ
RACQ Car Loan (Fixed)

Interest Rate (p.a.)

from 5.89% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$395

Monthly Fees

$0

Repayments

$0 per month
RAC
RAC Car Loan (Fixed)

Interest Rate (p.a.)

from 5.7% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$299

Monthly Fees

$0

Repayments

$0 per month
ING
ING Car Loan (Fixed)

Interest Rate (p.a.)

from 8.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$100

Monthly Fees

$0

Repayments

$0 per month
St George
St George Car Loan (Fixed)

Interest Rate (p.a.)

from 8.49% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$195

Monthly Fees

$12

Repayments

$0 per month
ANZ
ANZ Car Loan (Fixed)

Interest Rate (p.a.)

from 12.45% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$150

Monthly Fees

$10

Repayments

$0 per month
Wisr
Wisr Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 5.19% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $655

Monthly Fees

$0

Repayments

$0 per month
Wisr
Wisr Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 5.19% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $655

Monthly Fees

$0

Repayments

$0 per month
Wisr
Wisr Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 5.19% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $655

Monthly Fees

$0

Repayments

$0 per month
RACV
RACV Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 5.69% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $499

Monthly Fees

$0

Repayments

$0 per month
Beyond Bank
Beyond Bank Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 7.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $200

Monthly Fees

$5

Repayments

$0 per month
Latitude
Latitude Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 6.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $295

Monthly Fees

$10

Repayments

$0 per month
Pepper Money
Pepper Money Personal Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 7.95% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $200

Monthly Fees

$13

Repayments

$0 per month
NRMA
NRMA Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 5.69% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $499

Monthly Fees

$0

Repayments

$0 per month
Commbank
Commbank Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 6.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $250

Monthly Fees

$10

Repayments

$0 per month
NAB
NAB Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 10.69% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $150

Monthly Fees

$10

Repayments

$0 per month
Westpac
Westpac Car Loan (Fixed Rate)

Interest Rate (p.a.)

from 8.49% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $250

Monthly Fees

$12

Repayments

$0 per month
Plenti
Plenti Car loan (Fixed Rate)

Interest Rate (p.a.)

from 4.89% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $249

Monthly Fees

$0

Repayments

$0 per month
Plenti
Plenti Car loan (Fixed Rate)

Interest Rate (p.a.)

from 4.89% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $249

Monthly Fees

$0

Repayments

$0 per month
Plenti
Plenti Car loan (Fixed Rate)

Interest Rate (p.a.)

from 4.89% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $249

Monthly Fees

$0

Repayments

$0 per month

Comparison rates for loans under 3 years are based on an unsecured personal loan of $10,000 over 36 months. Comparison rates for loans 4 years and above are based on an unsecured personal loan of $30,000 over 60 months.

Warning: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

*Products shown do not represent all rates available from all lenders, or all rates available from the lenders presented. Plenti interest rate is based on a borrower with an excellent credit history using rates and fees applicable as at 8pm, 28 September 2020. All other car loan interest rates and fees displayed are as advertised by the respective lender on their website as at 27 May 2020 and may include short-term promotional offers. Comparison rates are calculated by Plenti. The actual product, rate, fees and charges you might be eligible for may be different based on your loan term, loan amount and credit characteristics.

Other fees and charges not shown here may apply. Rates shown are subject to change without notice. Information on this page does not constitute an offer of credit. Plenti RE Limited does not provide credit assistance in relation to all products compared on this page. The displayed order of products shows the lowest monthly repayment as default or is based on your sorting options and does not represent a suggestion that a particular credit product is appropriate for you.

Get the lowdown on car loans

Need some new wheels to get around town, travel to work or maybe do that road trip you’ve always wanted to do? A car loan can be a cost-effective way to get you in the vehicle that you want sooner.

Doing your ‘homework’ will help you understand what you are signing up for when it comes to borrowing for a car. In this section, we explore the ‘nuts and bolts’ of car loans: what they are, how they work and how to compare them. When you’re done, you’ll be equipped with all you need to shop around, get pre-approved and shop for your new car with confidence.

What is a car loan?

A car loan is a type of personal loan used to buy a motor vehicle including a car, ute, 4WD or motorbike. Depending on the lender and the loan, you can buy a new, demo or used vehicle. The loan is paid back in regular instalments (weekly, fortnightly or monthly) with interest, which may be fixed or variable across the life of the loan.

In Australia, you can borrow between $2,000 and $100,000+ across a range of loan terms, with 3, 5 and 7-year terms being most common. In addition to your car loan repayment schedule, some lenders will also allow you to make early repayments. This gives you the flexibility to reduce the time to repay your car loan, meaning you save on interest costs.

Low rate car loans can be more cost-effective than other types of vehicle finance. Each lender will offer different interest rates that you have to pay on the amount you owe. It’s worth checking carefully for any fees and the amount of time you have to pay back the loan when comparing against other sources of car finance (e.g. chattel mortgage, lease etc).

How do car loans work?

Car loan features vary across different lenders. Understanding the different building blocks of a loan, how they can be packaged and the pros and cons of each will be important factors in helping you choose the right loan for purchasing your new car.

What should I look for in a loan?

Interest Rate

The interest rate, also known as Annual Percentage Rate (APR) or Advertised Rate, is the percentage that you’ll pay on top of the amount you borrow in interest, usually expressed as an annual rate.

Car loan interest rates vary depending on the lender, your credit history, your repayment schedule and a range of other factors. They are based upon the lender’s calculation of risk (for you as an individual and the market as a whole) and their underlying costs. For low rate car loans, homeownership is a much stronger signal in assessing credit risk and can mean you are eligible to secure a better rate.

Many car loan providers and brokers market their products using a ‘headline’ advertised rate, which represents the best rate they are able to offer a customer. Often this low rate is available to only a small proportion of borrowers and may come with set conditions to qualify (e.g. a high credit rating plus homeownership). Before you apply anywhere, it pays to do your research and get a personalised rate from a number of providers. You just need to make sure that the lender’s quote process is ‘credit score friendly’. That is, they only conduct a soft-check on your credit file which won’t impact your credit score.

The competitive nature of the car loan market in Australia means it pays to shop around for a better rate. That being said, the lowest interest rate does not necessarily mean the best loan. You need to consider the total cost of the loan including interest, fees and other costs to truly assess the value of any interest rate on offer. When dealing with brokers or dealerships, in particular, it’s important to include service costs, such as brokerage fees. These fees are bundled into your loan at contract time. A great rate and repayment can quickly become a bad one when $2,000+ in broker fees are added on top.

Comparison Rate

The comparison rate represents the overall cost of a car loan, including the interest rate and fees, expressed as an annual percentage. The comparison rate is usually higher than the interest rate charged on the loan.

Under the National Consumer Credit Protection Regulations, automotive lenders and brokers must provide a comparison rate when they advertise a car loan interest rate. This was introduced to stop providers advertising lower rates when the total cost of the loan would be significantly more once fees and other costs were included.

For car loans, there is a standardised measure for how comparison rates are to be calculated and displayed:

For car loans 3 years and under comparison rates are calculated on a $10,000 loan amount over 36 months.

For car loans 4 years and over comparison rates are calculated on a $30,000 loan amount over 60 months.

Whilst the comparison rate is a useful tool for comparing low rate car loans on a like for like basis it’s important to remember that not all costs are included. For example, you still need to consider:

  • Government stamp duty and on-road costs
  • Late payment fees
  • Break costs or early termination fees
  • Deferred establishment fees
  • Broker fees (when taking out a loan through a broker, the broker’s service fees are not included in the comparison rate, which can be significant)

Repayments

Your car loan repayments are the amount you agree to pay to your lender on a regular schedule. Repayments can be weekly, fortnightly or monthly and vary by lender. Whereas interest rates and comparison rates can sometimes hide the true cost of a loan, your monthly and total repayments provide a clear basis for comparing the value of low rate car loans from different lenders. When making your comparisons, however, it is important that the loan repayment calculations have been quoted inclusive of any ongoing fees for all lenders.

Some car loan providers also offer a product feature called a balloon payment. A balloon repayment is a lump sum repayment to be made at the end of the loan term. For example, if you take out a $30,000 car loan with a $10,000 balloon repayment, the repayment in the final month of your loan term would include the $10,000 balloon plus interest. Balloon payments can be a useful tool for managing cash flow as they considerably reduce the amount you need to pay on your regular car loan repayments.

Whilst balloon payments seem attractive, there are two drawbacks to consider. First, because you are paying interest on a higher loan balance each month. As a result, you will pay more interest over the life of the loan. Second, many people fall into the habit of spending their monthly savings This means that when the time comes for the balloon payment, they need to refinance or take out a new loan to cover the cost of the balloon. The fees and interest of the new car loan outweigh the benefit of the lower monthly repayments and keep you locked into repaying your car for longer.

Repayment
Comparison
Balloon
Payment
No Balloon
Payment
Loan Amount$30,000$30,000
Interest Rate4.89%4.89%
Loan Term5 years5 years
Balloon Payment$9,000
(30%)
Monthly Repayments$431.91$564.63
Total Cost (Interest + Ongoing Fees)$4,914.60$3,817.80
Total Amount Repaid$34,914.60$33,877.80

Upfront Fees

Upfront fees, also known as application or establishment fees, are ‘one-time’ charges that are applied at the commencement of a car loan. These fees vary across different lenders:

  • A flat fee (e.g. $499) that applies regardless of the value of the car loan
  • A tiered fee (e.g. $250, $500, $750) based on the value of the car loan
  • A percentage fee (e.g. 3%) based on
    • the total amount borrowed; and
    • the credit or risk profile of the customer
  • A hybrid fee (e.g. $200 + 2% of the loan amount)

Establishment fees are usually capitalised to the loan. This means the fee is added to the amount you are borrowing to purchase your vehicle. For example, if you are borrowing $30,000 with an upfront fee of $499, the final loan amount will be $30,499.

Why is this important? Well – that interest rate you are being offered will be applied to the final loan amount – inclusive of your upfront fee. In the case of a small upfront fee, the difference might be a few dollars on each repayment. On an upfront fee of 4%, however, you could be paying $1,200 on a $30,000 loan, meaning you will be charged interest on a $31,200 balance. Ouch!

Monthly or Ongoing Fees

Ongoing fees, also known as account keeping or loan management fees, are paid, usually monthly, across the life of the loan. These fees are paid without reducing the principal amount that you owe. These ongoing fees will increase the overall cost of your loan, so generally the lower the fees, the better.

Like all fees, however, the presence or absence of monthly fees is all relative to the total amount you repay over the life of the loan.

Bank loans and loans sold through brokers often have lower upfront fees which are offset with a monthly fee of $8 to $13. This means the net cost of the upfront fee and the monthly fee may be higher than you otherwise would have paid for an online lender with a higher upfront fee and no monthly fees.

Brokerage Fees

Asset finance and mortgage brokers work as a bridge between you and the lender, arranging and negotiating the loan or finance package on your behalf. With so many choices, it can be tempting to use a broker to make life easier. While they offer assistance and assurance, they also need to stay in business and they do that in two ways.

First, brokers will charge a service fee, often referred to as a brokerage fee. In the case of car loans, the brokerage fee is often capitalised to the loan amount. This is usually in addition to the lenders own upfront fee. Adding a $990 brokerage fee to your loan may make that sharp rate they promised less competitive.

Second, brokers will often have commission arrangements with car loan providers that are either built into your interest rate or offer them a return based on the final rate you accept. These are the hidden costs of financing your car with a broker that can outweigh the benefits of the service offered.

With so many direct lenders in the market, it pays to do your research. Even if you end up using a broker, you’ll have a much better idea of how much they are really charging you for their services.

Penalty Fees

You should always try to avoid penalty charges — it’s just throwing your money away in the end. That being said, we’ve all missed a direct debit payment at some point in our lives.

The biggest penalty fees to look out for when it comes to your car loan is the ‘default’ or missed payment fee. This fee can be charged when you make a payment late, and often occurs where there are insufficient funds in your nominated account on the day a payment is due.

Late fees vary from $10 to as much as $35, so be sure to keep an eye on your spending, always making sure you have enough in your account to pay the loan. Some lenders may waive the fee if the account is brought up to date within 3 days but its best not to risk it.

To avoid late payment fees it can help to make a budget of your expenses before you accept your car loan so that you know that you’ll be able to make the repayments comfortably each month. You could also consider opening a separate savings account to transfer funds into each payday. This will help make sure funds are always available.

It is a case of buyer beware, so always take the time to read the terms and conditions and look out for any other hidden fees, such as charges to receive paper statements or penalty interest rates that apply to overdue amounts.

Early Repayment Fees

Repaying your loan as quickly as possible is a clever strategy as it will reduce the overall amount of interest you pay on your loan. However, if you do find yourself in a position to do this (well done!), the last thing you want is to be hit with an early repayment fee (also known as an exit fee). Exit fees or early repayment fees are more common with secured low rate car loans. There are different types:

  • A fixed fee where the loan is repaid in full any time prior to the end of the loan term (e.g. $500)
  • A fixed fee where the loan is repaid in full prior to a minimum period (e.g. $250 if full repayment is made less than 2 years into a 5-year loan)
  • A variable fee based on the amount you would have paid in interest and fees had the loan run to full term

In any case, that’s a fair amount for you to pay for doing something that is good for you. Make sure you read the fine print on fees before you commit to a loan so you don’t get locked into a bad deal.

Loan Amount

The loan amount is how much you intend to borrow. This is the principal amount upon which interest is paid (plus any upfront fees). In Australia, car loans usually range from $5,000 to $100,000, however, some specialised lenders may be willing to lend higher amounts. Within the advertised range, however, most lenders have loan capping rules.

For low rate car loans, there are usually two things that impact the amount you can borrow. First, is the Loan to Value Ratio (LVR). For different vehicles brands, types and manufacturing years, lenders will set specific LVR thresholds. An LVR of 85%, for example, means the maximum a lender will offer you is 85% of the value of the car, meaning you will need to provide a 15% deposit to complete the purchase. Most car finance providers in Australia will have a maximum LVR of 140%.

Second, is based on your borrowing capacity. Your borrowing capacity is the maximum loan amount you may eligible for based on your credit score, income, mortgage status and a range of other factors, including the lenders responsible lending obligations. The maximum loan amount you are eligible for will usually be communicated to you when you get an initial quote or rate estimate from a lender.

Whilst it may be tempting to borrow as much as you can for that new car with all the extras, make sure your repayments will be realistic to make within your budget. This will be a significant factor in determining whether your loan will be approved.

Loan Term

The loan term is the length of time that you have to pay back the loan which is pre-agreed with the lender. In Australia, lenders offer terms between 1 and 7 years, with 3, 5 and 7 year terms being the most common. A longer-term loan might have a higher interest rate and the loan will cost you more overall but your monthly car loan repayment will be lower. It’s good to remember that the longer you take to pay back your car loan, the more interest you will pay.   

Customer Experience

All car loan providers operate differently. So whilst customer experience isn’t a traditional product feature, it does go a long way to determining how quick and easy it is to apply, get approved and manage your loan. Trusting you are getting the best deal, a lender who cares about your experience should be a key factor in your decision.

The best place to start doing your homework is to check out reviews on third-party websites that provide independent and verified feedback about customers experience with a lender. Reading up on Google, Product Review, or Trustpilot you should get an idea of whether a lender is right for you. They tell you a lot about the customer experience at an aggregate level more than any list of features and attributes might.

Each year, Canstar assesses and rank 100s of secured and unsecured car loans to help borrowers to decide which ones will be awarded a 5-star rating.  In addition to rating the overall product’s value (80% of the score), Canstar’s ratings include 20% for the loan’s features. This includes Loan Management and Customer Service and Support. For a loan to get a 5-star Canstar rating, the lender has to provide great customer service and tools, such as an online portal for managing your loan and repayments.

Market Insight. Plenti won the Outstanding Value awards for both the new car loan and used car loan in 2019. This was the first year the car loan product was launched.

Other Considerations

Whatever type of car loan you are looking at always check for vehicle restrictions including:

  • The maximum age the car can be at the end of the loan term 
  • What types of cars and vehicles can be funded (e.g. evs, utes, vans etc)
  • Can you buy used or secondhand vehicles? If so, does it have to be through a dealer or can it be a private sale?

What are the different types of car loans?

New vs Used Car Loans

You can usually buy a new car or demo model car from a dealer and the loan will include on-road costs. While you can generally purchase a used car from a dealer or via private sale, some lenders may put extra conditions on the purchase such as a maximum age restriction (usually seven years) or ask for additional paperwork. The amount of restrictions placed on your car loan also depends if you are using the vehicle as security for your loan.

Secured vs Unsecured Car Loans

When taking out the loan and purchasing your car, you’ll need to decide if you want it to be ‘secured’ or ‘unsecured’. 

With a secured car loan, the car that you’re purchasing is put up as collateral. This means that if you cannot pay back the loan, the lender has the right to repossess the car to recover the debt. A secured loan is therefore considered less risky by the lender and will often attract lower interest rates and fees. To do so you will probably need to give the lender the car’s registration and engine number, and proof of purchase. The lender will need to have their interest in the car registered on the Personal Property Securities Register (PPSR) and be listed as an interested party on your Comprehensive Car Insurance Policy. You will not be able to able to obtain a secured car loan without this.

Usually, a secured loan is only to cover the cost of purchasing the car itself and not all the extra costs like insurance and registration. The lender may pay your secured car loan directly to the dealer or seller, so you may need to provide their details.

You may be able to buy and secure the loan with a used car but this may come with maximum age limit – usually for cars up to twelve years old and the end of the loan term. Depending on the lender, you may also be able to use a secured loan to refinance your current vehicle’s existing car loan, which could save you money on interest and fees. As with any secured loan, your car would need to be within the lender’s Loan to Value Ratio (LVR) requirements, so they can get back what you owe in the case of repossession.

Why choose a secured car loan?
+
Lower rates
+ Good if you want to buy a new or used car under 7 years old
+ Borrowing potential increased
+ Longer terms available
Can take longer to approve
More restrictions on what you can buy
You can’t use it for other costs (aftermarket upgrades, repairs etc)

An unsecured car loan is a type of unsecured personal loan. With an unsecured personal loan, no assets are used as security against the loan. In this case, a lender’s decision to provide you with a loan is based solely on how creditworthy you are. Put simply, are you more or less likely to make your repayments on time or default on the loan.

Unsecured loans generally have shorter loan terms (up to 5 years) and a lower maximum loan amount (up to $50,000). There are, however, fewer restrictions on how you spend the loan funds. This means you may buy a vehicle of your choice, regardless of age. You also have the flexibility to use your loan to pay for other costs that arise when buying a car, including:

  • Insurance
  • Registration
  • Tyres
  • Aftermarket upgrades
  • Roadside assistance
  • A pre-paid maintenance agreement

Why choose an unsecured car loan?
+ Greater freedom for what car you can buy
+ Your can use it for other costs (insurance, registration, etc)
+ Quick application process
– Higher rates
– Less borrowing potential
– Shorter loan terms

Fixed vs Variable Rate Car Loans

Car loan repayments are either based upon a fixed (set) or variable (changing) interest rate. A variable-rate car loan is one where the interest rate can change up or down across the life of the loan. When rates go up so will your repayments. On the flip side, if you are lucky and your interest rates go down, your repayments will too. 

What the markets, and in turn lenders’ interest rates, will do is unpredictable (especially over multiple years). If you’re considering a variable rate car loan, factor in a buffer into your budget, so that you’ll be able to manage higher repayments if rates do go up. 

Why choose a variable rate car loan?
+ Usually more flexibility to repay your loan early
+ You’ll benefit from lower repayments if interest rates go down
+ Rates are competitive
– A rate increase will result in higher peyaments
– Budgeting is harder

When you take out a fixed rate car loan, the interest rate is locked in for the term of the loan. Fixed rate loans often have higher interest rates than what’s been offered for variable loans. So, what’s the advantage of a fixed interest car loan? Put simply, you know that whatever happens, your repayments will stay the same. This means no scratching around to find the extra cash for higher repayments if rates go up.

Car loans that have a fixed interest rate may have less flexibility and freedom to make early repayments, however, this depends on the lender. Many online car loan providers offer no early repayment fees regardless of whether your loan is fixed or variable. If you think you’ll want to make extra repayments and potentially repay your loan early, then make sure you check with each provider before you apply online. 

Why choose a fixed rate car loan?
+ Know what your repayments will be for the life of the loan
+ Easier to budget
More likely to have early repayment fees
May be less flexible depending on provider

Green Car Loans

If you buy an eco-friendly car such as a hybrid or electric vehicle, you may be able to get a better deal on your loan. Known as a ‘green car loan’, lenders may discount the interest by 0.5%-1% and/or reduce some fees, if the vehicle meets their definition of environmentally friendly. Usually to be eligible for a green car loan the vehicle will need to be:

  • A new or demonstration model
  • Hybrid or electric vehicle
  • More fuel-efficient than the average car in its class/ size

As well as reducing your loan cost and your CO2 emissions, you’ll save on fuel costs. Win-win!

Car Loans vs Dealer Finance

You can get your vehicle financed by a lender, such as a bank, credit union or online financial institution. Lenders offer a greater range of options for the amount you can borrow (to include extra on-road costs for example) or the loan term (the amount of time you take to pay back).

Why choose a car loan?
+ More transparent
+ More flexibility for how mcuh you can borrow and how long for
+ Can browse and compare deals on your own, without pressure
+ Car loans can be used for new or used cars
+ Car loans can be used for dealer or private sales

Many car dealerships offer on-site finance. It may seem like an easier option to get it all done in one place and getting the dealer to handle the paperwork to process the loan. Given that dealerships often rely on financing, when the dealer organises and does the paperwork, it may not be the best deal for you.  They may also mark up the cost of the car to make back any discounts they give you on the interest rates. Carefully check the details of the contract, including whether any additional fees apply and if the loan terms suit you and your budget.

Why choose dealer finance?
+ You can do it all on-site, in one place
+ The dealer can organise most of the paperwork
There may be a mark up the car’s price to cover other ‘discounts’

Having a pre-approved loan when you approach a dealership, might be enough to help you bargain and get a better purchase price. Always shop around: do your homework so you know what deals are on offer from traditional lenders before you start financing discussions with dealers

Personal vs Commercial Car Loans

If you are going to use your car for business, and you are a sole trader or business owner, there’s a range of vehicle finance options. A business car loan will often come with tax benefits and flexible lease options.

If you are using the car for a mix of personal and work reasons, you may be able to claim a percentage of the car’s ‘depreciation’ (wear and tear), but generally not the interest or the loan itself. This does not include driving to and from work. You should always check with a registered tax agent before making any claim for deductions related to your car.

As well as a regular loan, options for businesses include:

  • Finance Lease
  • Commercial hire-purchase
  • Chattel Mortgage
  • Novated lease
  • Business loan

Other types of car finance

The term ‘car loan’ can sometimes be used to describe the broader family of car financing options available to consumers and businesses. These types of car finance, however, have distinct differences to a traditional car loan.

Chattel Mortgage

A chattel mortgage is a form of finance where the lender agrees to provide funds for the purchase of an asset, in this case, a car, in return for security over the asset for the duration of the loan term provided the car is predominantly for business purposes. Once the loan is repaid, the mortgage is discharged (similar to a home loan). As is the case with a secured car loan, in the event, you are unable to meet your repayments, the lender may be able to repossess the car.

Chattel mortgages are a popular option for business owners and the self-employed as you own the asset upfront meaning it appears on the balance sheet as an asset and the mortgage as a liability. A chattel mortgage allows a business owner to claim an input tax credit upfront as the purchase price of the car is funded inclusive of goods and services tax (GST). You may also be able to claim interest and depreciation costs based on the proportion of time the car is used for business purposes.

Car Lease

A car lease is a type of finance where the lender purchases the car directly and you agree to make rental repayments over an agreed term. At the end of the lease, you may have an option to purchase the car outright at a reduced price or return the vehicle.

Novated Lease

A novated lease is a form of car lease that is used with salary packaging. With a novated lease you enter into an agreement with the finance provider and a salary sacrifice agreement with your employer to cover the repayment and running costs of the vehicle from the pre-tax income. In turn, your employer makes payments directly to the finance provider on your behalf.

Novated leases have a number of benefits that make them popular. First, as repayments and ongoing running costs come from your pre-tax income, you can effectively reduce your taxable income. Your tax bracket, costs and other consideration will impact how cost-effective this is. Second, motoring costs are effectively GST free for employees as the employer can claim back this tax component of any costs associated with the lease as an input tax credit.

Commercial Hire Purchase

With a commercial hire purchase agreement, the lender agrees to purchase the car for you and hires it back to you for an agreed period (usually 1 to 5 years). You will have full use of the car for the duration of the agreement but it is owned by the financer. Unlike a car lease, however, when the contract comes to an end and the total costs of the vehicle (inclusive of lender interest) have been repaid, ownership of the car is transferred to you. As the name suggests, commercial hire purchases only available for cars used for a business purpose.

How much does a car loan cost?

The type of car loan, its conditions and how quickly you pay it back impacts how much it will cost you over its lifetime. To work out the overall cost of your car loan, you need to factor in:

1. Your Interest Rate: Fixed or Variable

The biggest factor in how much a car loan will cost you is the rate of interest you’ll pay on the amount borrowed. If you are opting for a variable rate car loan, it is best to also calculate a worst-case scenario, one where a loans interest rates rise significantly in the future to be sure you have a comfortable buffer in the event things change.

2. Upfront Fees

The ‘establishment’ or application fee can vary greatly, it’s an area where shopping around can make a difference.

3. Ongoing Fees

Ongoing fees that occur throughout the loan:  

  • Any monthly or annual fees (e.g. account keeping fees)
  • Any default, dishonour or missed payment fees
  • Any other hidden fees — check the terms and conditions to find these!

These three costs can be combined to create a car loan comparison rate. As long as you are comparing the same loan terms and amount, a comparison rate helps you to compare the cost of different loans.

There may be fees for early repayments or if you pay back the loan in full early. Balance these against the benefit of reducing the amount of interest that you pay on your loan by making extra repayments reducing the amount you owe. If you are choosing a car loan with a balloon payment, you might have a lower car loan repayment each month but the loan overall might cost you more. 

Remember that a car is not an investment. Its value will go down over time (depreciate). When you want to trade-in or sell your car you will likely get less than what you paid for it. Particularly when you factor in the loan’s costs, the car will have cost you more than the original purchase price.

Always shop around and use comparison tables, car loan repayment calculators and the comparison rate as a guide. It’s best not to bite off more than you can chew and opt for a deal that has manageable repayments for your income/expenses.

Taking the next steps

How do I choose a car loan?

There is no one size fits all when it comes to car loans, find your best fit.

To get started, make a few key decisions that will help you choose a car loan. You can tweak these later on, but this will help you to start looking at, and comparing, what products might work for you.

How do I choose a loan

1. Loan Amount: How much do you need?

To decide how much you need to borrow, do some research and budget to work how much (approximately) you need for that car. 

It’s smart to only borrow what you really need, rather than all that is available to you. Try to separate emotional ‘wants’ versus actual ‘needs’. How much you will use it and what you will use it for will come in to play here.  

Remember, any money that you borrow to purchase a car, the actual ‘cost’ becomes much higher. For example, if you borrow $20,000 to buy a car under a 5 year Unsecured Car Loan with a fixed interest rate of 12.50%, once you factor in the average extra fees that car may actually cost you $27,4174. You will also have to cover registration, insurance and maintenance. Remember, you will likely only be able to sell the car for less than you paid, the moment you drive it off the lot.

2. Repayments: How much can you afford? 

Look at your everyday budget, or create one, to see how much you can realistically afford to put towards repayments. It’s always good to give yourself a buffer; failure to pay can cost you a lot. Are you expecting any major expenses or changes in income in the next few years, such as a baby?

3. Loan Term: How long will you need to repay?

Divide the loan amount by your monthly repayment to get a ballpark amount of time to repay the loan. For example, Frank wanted to borrow $24,000 for a new car. Based on his salary and existing expenses, he thought $120 per week / $480 per month would be an affordable repayment.  This would be $5,760 per year, meaning in 5 years he’d have paid $28,800— roughly, accounting for interest and charges.

A longer-term loan might seem attractive as it means lower monthly repayments, the overall (lifetime) cost of the loan is significantly higher.

4. Loan Type: Decide between secured or unsecured?

This will depend if you are willing to put the car up as security against the loan. If you are confident in your ability to repay the loan, then a secured loan will get you a better rate. However, the lender has the right to repossess the car if you can’t repay the debt.

5. Compare: Start to look at your personalised offers

Now that you, roughly, know you can start to plug these into comparison sites and calculators. You can start to play with different combinations, such as loan terms, and match these against your needs. Use comparison tables, repayment calculators and the comparison rate as a guide. 

Using a third-party rating agency to help you compare

Need more help deciding? There are many third party agencies (that don’t sell loans) that rate and compare a broad range of loans.

Canstar is one of the most established and biggest financial comparison sites, comparing more brands since 1992. They release star-ratings for car loans from many providers.

To do so, Canstar comprehensively and rigorously examines a broad range of loans available across Australia.  To come up with an overall score, they award points for:

  • Price — comparative pricing
  • Features — positive features of the product (application and settlement, product management, customer service and loan closure)

These are then aggregated and weighted to produce a total score.   This means Canstar’s ratings are reputable and transparent, so you can trust the information they provide and dig deeper if you want to. 

Other comparison sites can also be super useful, however, always check around, as they do have a business element and receive money for the people that click through to a lenders’ website. If the best rate isn’t ‘on their books’ it may not show up on their comparison. They also have ‘promoted’ or ‘featured’ loans, which they are paid to highlight, even if those loans do not truly reflect the best value loans on the market.

Another way to get information on your lender and loan is to read feedback from real (verified) customers’ on ProductReview.com.au.

What questions should I ask to choose a car loan?

There are a few questions that you should ask to make sure a particular car loan is right for you.  You can use this as a checklist to be confident you understand your loan.

  • What is the interest rate and the comparison rate? 
  • How does this compare to other loans?
  • What are the fees and charges? (Upfront, Ongoing, Early Exit) 
  • What are the terms and conditions? 
  • Does the loan term and loan amount fit your needs? 
  • How will the payments work? Is there flexibility?
  • Can you afford the repayments?
  • If you opt for a loan with a balloon payment, will you be able to afford to pay the lump sum at the end of your loan? 
  • Are you comfortable with the lender? (Have you checked its reputation and accreditation?)
  • What are the restrictions on the vehicle?

How do I buy a car using a loan?

  1. Create a budget: based on your current financial situation. Work out how much is feasible to pay in repayments and explore your repayment options. You should also factor in extra costs like registration and insurance.  
  2. Decide what type(s) of cars might fit your needs and budget. Think about the make, model, year, size and fuel consumption. 
  3. Research how much you think you’ll need to spend: look at a variety of new, used dealers and private sellers. 
  4. Choose which option(s) will suit you best and sit within your budget.  
  5. Research potential cars: inspect, test drive, check reviews. Shop around for the best deal!
  6. Shortlist your preferred cars.  
  7. Compare and weigh up the pros and cons of the loans available. Use comparisons tables and repayment calculators to choose your loan. Many lenders will give you an estimated rate (that doesn’t impact your credit rating) before you apply online. 
  8. Apply for a pre-approved car loan. This means you have been approved to borrow an agreed amount. However, it is conditional, meaning you still have to make sure the vehicle you purchase fits in with the lender’s borrowing criteria.  
  9. Negotiate with the seller or dealer.  If you have pre-approval you’ll be able to finalise the deal much quicker.  In the case of dealers, cars are often marked up. The dealers are usually on commission, so they’d prefer to reduce their profit rather than not make a sale at all.   
  10. Sign on the dotted line and do the paperwork to transfer ownership!
    1. If you are buying through the dealer, they will organise most of the paperwork. However, your lender may arrange to pay them directly. 
    2. If you are buying from a private seller, they’ll need to get a roadworthy certificate, transfer the ownership and registration, and provide receipt and identification. The exact documents vary from state to state, so check with your local road and transport authority.
    3. If your car loan is secured you will also need to organise comprehensive insurance cover with your insurance provider and have the lender listed as an interested party on the policy. Other documents and vehicle inspections may also be required before your loan documents are issued and ready to accept.
  11. Organise for the loan to be settled. If you have a preapproval you’ll need to settle the funds. (At Plenti we have an easy online settlement tool that you can do). How this works depends on a) how you are purchasing the car and b) what type of finance you have.
  12. Drive away in your new wheels!

Should I get the loan pre-approved?

To give loan pre-approval, the lender follows the usual process of assessing your situation. It is useful because you’ll step into negotiations with a firm maximum amount, stopping you from getting carried away and blowing your budget.  It can speed up and make negotiations, particularly with dealers, smoother and easier.

Pre-approvals are only valid for a few weeks, so you’ll need to be reasonably quick in finalising your purchase. Not all lenders offer pre-approval.

Pros and cons of getting pre-approved for a car loan?
+ You can bargain with confidence, knowing what you can borrow 
+ You can focus only on options within your price range
+ Your limit is set, salespeople can’t tempt you into spending more
+ You get to research and get the best loan for you in your own time
It is only valid for a limited time – so you’ll need to be ready
Not all lenders offer pre-approval for car loans
You’ll need to make sure the car meets the conditions of the pre-approval or you will need to re-apply

How do I apply for a car loan?

Applying for a car loan is quicker and easier than you might think.

Am I eligible?

Whether or not you are eligible to get a car loan, and how much you can borrow, varies from lender to lender, from loan to loan.

At a minimum, you need to: 

  • Be at least 18, sometimes 21 or over 
  • Be an Australian citizen or permanent resident, although some lenders do loan to people on temporary work visas such as 457 
  • Be earning at least $25,000 per year, sometimes more, from a regular source of income that you can demonstrate
  • Have at least a provisional or full driver’s licence

Some lenders, although not all, will consider:

  • Applicants with existing loans or debt (there may be fewer options)
  • The self-employed, usually with additional criteria 
  • People on a low income, the pension or Centrelink payments

Be sure you check the eligibility criteria for any lender you are considering to avoid impacting your credit score on an application you would never have been approved for.

What is the process?

Once you have shortlisted and decided on your lender you can usually get a quote or estimate, your estimated borrowing power and some loan options before you apply. Depending on the lender, you can usually apply online or over the phone, or in-person if the lender has physical branches. You’ll usually need to verify your identity and then provide a range of information.

What documents will I need to apply?

Each lender will vary in what documents they need to process your application. This may include:

  • Proof of identification: Australian drivers licence or a passport and some bills for proof of your address. 
  • Verification of your income: Payslips, bank statements or tax returns
  • Show your expenses and liabilities: Via bank, loan statements etc 

Some lenders, such as Plenti, have a streamlined online portal, where you can connect directly to your bank account and share data, quickly and without fuss. 

Depending on the type of car (new, demo or used) and the method of purchase (dealer vs private sale) your lender should guide you through the documents and steps required to complete your loan (e.g. uploading sale documents or comprehensive car insurance policy details).

How do I improve my chances of getting approved?

Your lender will review:

  • Your employment stability
  • Your income (eg salary, rent, interest etc)
  • Your expenses (eg mortgage, groceries etc)
  • Your repayment history
  • Credit agency/bureau information  (Credit Report and Score/Rating) 

All of these determine if you are approved and for how much. If you’ve had problems paying your bills and debts in the past, it might limit your options. To improve your chances of being approved:

  • Choose a loan amount that you can afford. Make sure that the sum of money that you are asking for is within your means. Be certain that you can comfortably make the repayments on your current income and while meeting your other expenses.  Lenders don’t like taking risks, so show them that the payments will fit within your budget.
  • Minimise your credit card balance. Use a credit card to help boost your credit rating by demonstrating you are financially responsible. However, you need to manage your credit card carefully to ensure you consistently don’t owe much. Failure to make repayments on time can also have a negative impact on your credit score.
  • Pay your existing debts on time. Late repayments (anything more than 14 days) may be recorded on your credit file and have a negative impact on your score. Lenders often base a loan’s rate on the risk that the loan won’t be repaid. If you fall behind and regularly pay late, lenders might only give you higher interest loans. If you are struggling, working with your lender might help protect your existing score.
  • Pay down existing debts. Lenders get nervous when an applicant has a large amount of existing debt — especially when what they already owe is at the limits of what they can afford to repay. If you are in this situation, show that you are committed to consistently repaying your existing debts. Even if you are applying for a carl loan to refinance (to get a lower interest rate), you’ll need to show you are making an effort to pay and/or that you’ve got extra funds due to a change in your income and expenses.
  • Review your credit history. You can request a free credit check from one of Australia’s major credit rating agencies: Equifax, Experian or Illion. It will give an overview of your credit history, including previous loans, existing debts and your borrowing behaviour. Check all the information in your credit report is correct. If something is incorrect, it might be impacting your credit score. Contact the agency to get it fixed/removed.
Sebastian Paulin

Written By Sebastian Paulin

Sebastian has worked with Australia’s leading banks and fintechs for over 12 years building better consumer experiences.

FinTech & Consumer Finance Author

Frequently Asked Questions

What is a good interest rate on a car loan?

Car loan interest rates vary depending on several factors: the lender, your credit history and your repayment schedule. In short, the interest rate is determined by a lender’s risk calculation (for you as an individual and the market as a whole) and their underlying costs. For example, many lenders consider homeownership a strong signal in assessing credit risk and can mean you are eligible to secure a better rate.

Many car loan providers and brokers market their products using a ‘headline’ advertised rate, which represents the best rate they are able to offer a customer. Often this low rate is available to only a small proportion of borrowers and may come with set conditions to qualify (like a high credit rating plus homeownership). Before you apply anywhere, it’s worthwhile to do your research and get a personalised rate from a number of providers. However, ensure the lender’s quote process is ‘credit score friendly’. That is, they only conduct a soft-check on your credit file which won’t impact your credit score.

How can you save on a car loan?

The competitive nature of the car loan market in Australia means it pays to shop around for a better rate. That being said, the lowest interest rate does not necessarily mean the best loan. You need to consider the total cost of the loan including interest, fees and other costs to truly assess the value of any interest rate on offer.  It’s important to include service costs, such as brokerage fees particularly when you’re dealing with brokers and dealerships. These fees are bundled into your loan at contract time. A great rate and repayment can quickly become a bad deal when $2,000+ in broker fees are added on top.

If you buy an eco-friendly car such as a hybrid or electric vehicle, you may be able to get a better deal on your loan. Lenders may discount the interest by 0.5%-1% and/or reduce some fees for ‘green car loans’ if the vehicle meets their definition of environmentally friendly. Usually to be eligible for a green car loan the vehicle will need to be:

  • A new or demonstration model
  • Hybrid or electric vehicle
  • More fuel-efficient than the average car in its class/ size

As well as reducing your loan cost and your CO2 emissions, you’ll save on fuel costs. Win-win!

How much can I borrow with a car loan?

The amount you can borrow for a car in Australia varies for each lender and ranges from $2,000 to $250,000. For example, Plenti offers low-interest secured car loans from $10,000 to $100,000 for new and used cars under 7 years old. Plenti also offers unsecured car loans with a minimum loan amount of $2,001 up to a maximum loan amount of $45,000 for cars of any age.

When you complete your quote, your lender will provide you with an initial estimate of your borrowing capacity and the maximum loan amount you are eligible for. With some lenders, you will be able to apply for pre-approval up to this amount. However, we recommend you only apply for what you need to cover the purchase price of the car you are looking to buy or have budgeted for including on-road costs. You pre-approval does not lock you and the final loan amount and repayment options can be changed as part of the settlement process.

What is a pre-approval?

In basic terms, pre-approval is your lender agreeing to give you a loan before you’ve purchased your car. Usually, this means they are agreeing to give you a certain amount, to buy a specific type and age of car.

To give loan pre-approval, the lender follows the standard process of assessing your situation. Many consumers find pre-approvals useful because they can step into negotiations with a firm maximum amount, cap their spending and ensure they don’t blow their budget.  Pre-approval can also speed up and make negotiations smoother and easier.

Pre-approvals are only valid for a few weeks, so you’ll need to be reasonably quick in finalising your purchase. Not all lenders offer pre-approval.

Can I get a car loan if I’m self-employed?

Yes, there are a number of lenders who will provide a car loan to you if you are self-employed, this is sometimes known as a low doc car loan. To be eligible to apply for a car loan as a self-employed individual there may be additional requirements. Generally, you will need to have been in your current role for at least 12 months and be able to provide your most recent two individual tax returns and the corresponding notice of assessment from the Australian Taxation Office.

Do I need a deposit for a car loan?

For different vehicles brands, types and manufacturing years, lenders will set specific Loan to Value Ratio (LVR) thresholds. For example, an LVR of 85% means the maximum a lender will offer you is 85% of the value of the car, meaning you will need to provide a 15% deposit to complete the purchase. Most car finance providers in Australia will have a maximum LVR of 140%.

Does applying for a car loan affect my credit score?

Before you apply anywhere, do your research and get a personalised rate from a number of providers. You just need to make sure that the lender’s quote process is ‘credit score friendly’. That is, they only conduct a soft-check on your credit file which won’t impact your credit score.

With Plenti, when you request a RateEstimate, Plenti Pty Limited will request a copy of your credit file as an ‘access seeker’, known as a soft credit check. A soft credit check is only visible to you and other access seekers, will not be visible to other credit providers and does not impact your credit score.

If you complete a loan application Plenti RE Limited will submit a credit enquiry and request your credit file. This may impact your credit score.

How do I compare car loan repayments?

Our Car Loan Comparison calculator allows you to compare repayments against other lenders across a wide range of secured car loans from $10,000 to $100,000, to choose the loan that’s right for you.

What is a car loan calculator?

A car loan calculator allows you to play with different combinations, such as loan term, loan amount and match these against your needs. Our Car Loan Comparison calculator allows you to compare a wide range of secured car loans from $10,000 to $100,000, against other lenders, and choose the loan that’s right for you.

Can you get a car loan with a bad credit rating?

Some specialty lenders may consider your car loan application where you possess a poor credit score or previous bankruptcy. The rates and fees of these loans are likely to be significantly higher than other lenders which could significantly impact you as a borrower with a poor credit history. Where possible, you should try and explore ways to improve you credit score before committing to a high-interest car loan.

To be eligible for a Plenti car loan you must have a good credit history. Plenti will consider a loan application if you can demonstrate a significant recovery from a bad credit history. Additional credit assessment criteria and requirements may apply.

If you are ineligible for a Plenti secured car loan, we may still be able to offer you an unsecured low rate personal loan. There are no additional steps to take, as part of the quote and loan approval process, we’ll make it clear what type of loan you are being offered, what type of rates apply (e.g. variable or fixed rates) and any fees and charges that may apply.

Complex words, simply explained.

The car finance market is full of technical terms and language that is sometimes hard to avoid. At Plenti, we think you should know what these words really mean. So we’ve done our best to provide you with simple, easy to read explanations, all in one place.

Glossary of terms

Applications Fees. Application fees are a once-off fee to apply for and set up a car loan, that is not refundable. These may also be called establishment fees, up-front fees, start-up fees, or set-up fees.

Asset. An asset is something of value that you own (such as a car or property). Assets can be used as ‘security’ also known as ‘collateral’, meaning the banks can repossess this if you can’t repay your debt.

Balloon Payments. Used in car loan and leasing, a balloon payment is when you opt to pay a larger lump sum at the end of the loan, in return for lower monthly repayments. The overall cost of a loan with balloon payments might be higher.

Comparison Rate. The comparison rate on a car loan shows the overall cost of the entire loan. It includes the loan’s interest rate and most fees, which is then expressed as a single percentage of the entire amount borrowed.

Credit Score (Credit Rating). A Credit Rating or Credit Score is calculated by a credit rating agency or bureau based on information in your credit report and is a number that sums up the reliability or risk that you pose as a potential borrower.

Credit Report. A credit report is put together by a credit rating agency or bureau and outlines important information from credit card providers, lenders, and utility service providers. Lenders access this to decide whether or not to lend to you. You can request a free copy.

Credit Reporting Agencies or Bureaus. Credit agencies collect and share credit history information. Lenders get reports and scores from them in order to assess applications for loans or a credit card. The credit bureaus will provide you with a free copy of your credit report and score upon request.

Comprehensive Credit Reporting is relatively new in Australia. It allows a more detailed level of information about a loan applicant – both positive and negative – to be shared by Credit Rating Agencies.

Default. A default is when someone cannot or will not pay a debt, including a car loan over a period of time, not meeting the agreement of the loan. This might result in court action or repossession of the vehicle in the case of a car loan.

Depreciation. Depreciation is when an asset’s value goes down over time. If it goes up it appreciates. A car is likely to depreciate over time, a house may appreciate over time.

Early Repayment. Early repayment is when you pay off the balance of the car loan before the Loan Term. Some lenders charge fees for this.

Establishment Fees. Establishment fees are a once-off fee to apply for and set up a car loan, that is not refundable. These may also be called application fees, up-front fees, start-up fees, or set-up fees.

Exit Fees. Exit fees are charged by the lender when the borrower leaves a car loan earlier than the agreed loan term, either due to ‘early repayment’ or refinancing.

Fixed Interest Rate. A car loan with a fixed rate has the interest rate set for the life of the loan. This may be a higher rate but enables the borrower to know exactly how much they are repaying for the entire life of the loan, or for a pre-determined portion of the loan e.g. 5 years.

Interest Rate. The interest rate is the percentage on top of the original amount borrowed that you will have to pay back. The interest rate might be fixed or variable.

Lender. A lender is any licensed institution offering financial products. This might be a bank, credit union, marketplace lender, neobank or online financial institution.

Loan Amount. The loan amount is the sum of money that is borrowed from the lender.

Loan Term. The loan term is the length of time in which the loan is to be repaid.

Loan to Value Ratio (LVR). The Loan to Value Ratio is the loan amount divided by the value of the asset. Usually, lenders like to keep it the loan amount over 80% of the value of the asset it is secured against.

Once-off Fees. Fees that you have to pay at the beginning of the loan, that only occur once, and covers the application or set-up of the loan or registration of an interest in an asset used as security. Once-off fees vary depending on the lender. Also called upfront, establishment, application, documentation or set-up fees.

Ongoing Fees. Ongoing fees are paid, usually monthly, throughout the life of a car loan — without reducing the amount that you owe. These vary greatly from lender to lender. Also known as account keeping or loan management fees.

Penalties. Any fee or charge applied to the borrower for a breach of loan terms, for example, late repayment.

Repayments. Repayments are the amount that you will need to pay off your car loan (interest is included) for the duration of the loan.  These are often monthly but may also be weekly or fortnightly.

Repossession. A lender with security has the right to repossess (take ownership of) a borrower’s asset, like a car, if they cannot pay their loan debt. This is usually only if it is for a ‘secured’ loan, where the borrower has nominated that asset to be used as security for the loan.

Secured Car Loan. A secured car loan is when the borrower puts up an asset, in this case, the car being purchased, as security for the loan. The bank can sell this item to get their money back if the loan isn’t repaid.

Upfront Fees. These are the fees that you have to pay at the beginning of a car loan, that only occur once, and covers the application or set-up of the loan. Upfront fees vary depending on the lender. Also called once-off, establishment, application or set-up fees.

Unsecured Car Loan. A car loan where the borrower does not have to put up the car being purchased (or any other asset) as security. This type of loan may offer higher interest rates and lower borrowing amounts. In Australia, a lender may still have recourse to a borrower’s assets in the event of default but this would need to be initiated via collection, court or bankruptcy proceedings.

Variable Interest rate. A variable (changing) interest rate, means a loan’s interest rate will go up and/or down as market conditions change and/or lenders cost of funds change. It is difficult to predict what interest rates will do, especially over a number of years.

Representative Example: Based on a car loan of $30,000 over 60 months a homeowner with an excellent credit history can expect to pay a total of $34,158.60. This represents a comparison rate of 5.44% p.a. and includes all interest and fees included in your loan repayments over the life of the loan. Plenti car loans are available from 3 years to 7 years. Car loan interest rates range from 4.89% p.a. (comparison rate 5.44% p.a.) to 9.99% p.a. (comparison rate 10.56% p.a.).