Car loans are designed to help individuals finance the purchase of a car. With a car loan, you can borrow a specific amount of money from a lender to buy a vehicle of your choice. The loan amount, interest rate, and repayment period are determined based on factors such as your creditworthiness, income, and the value of the car. Car loans often have fixed interest rates, meaning the rate remains the same throughout the loan term, allowing for consistent monthly payments. Repayment periods can range from a few years to several years, depending on the loan terms and the amount borrowed.
Here's what a car loans typically looks like:
A car loan can be used to finance the purchase of a vehicle, whether it's a sedan, SUV, or truck. It provides an opportunity to buy a car that fits your needs, whether for daily commuting, family trips, or off-road adventures. A car loan makes vehicle ownership more affordable by spreading out the cost over manageable monthly payments.
Here are some common reasons people take out a car loan:
Car loans are commonly used to finance the purchase of a brand new car, providing funds to buy a vehicle straight from the dealership.
Car loans can also be used to finance the purchase of a used car, allowing individuals to buy a pre-owned vehicle that fits their budget and needs.
Car loans can be used to upgrade an existing vehicle, whether it's adding new features, installing aftermarket accessories, or improving the overall performance.
In cases where a car needs significant repairs, a car loan can help cover the costs of fixing mechanical issues, replacing parts, or addressing body damage.
Some individuals use car loans to consolidate their debts, including high-interest credit card debt or personal loans, into a single loan with a lower interest rate.
Car loans can be utilised for business purposes, such as purchasing vehicles for a company's fleet, catering to delivery services, or as company cars for employees.
Car loans are often used to meet the transportation needs of a growing family, whether it's accommodating more passengers, adding child-friendly features, or upgrading to a larger vehicle.
Car loans can help individuals secure reliable transportation for their daily commutes, making it easier to get to work, run errands, or attend appointments.
Car loans enable individuals to finance vehicles suitable for outdoor adventures, such as camping trips, road trips, or off-roading excursions.
Car loans are often used to replace an old or unreliable vehicle, ensuring individuals have a dependable mode of transportation for their everyday needs.
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When it comes to car loans in Australia, the amount you can borrow will depend on various factors, including your income, creditworthiness, and the lender's policies. Generally, car loans can range from a few thousand dollars to tens of thousands of dollars. For new cars, lenders often offer financing options up to 100% of the vehicle's purchase price, allowing you to borrow the entire amount. However, it's important to note that borrowing the full purchase price may result in higher monthly repayments and interest costs over the loan term. For used cars, lenders may offer financing up to a certain percentage of the vehicle's value, typically around 80% to 90%. This means you may need to provide a deposit or pay a portion of the purchase price upfront.
The loan term for car loans usually ranges from 1 to 7 years, depending on the lender and the age of the vehicle. Shorter loan terms may result in higher monthly repayments but lower overall interest costs, while longer loan terms may offer more affordable monthly payments but result in higher total interest paid over the life of the loan. Interest rates for car loans can vary based on factors such as your credit score and the age of the vehicle. It's important to shop around and compare rates from different lenders to ensure you're getting the most competitive offer. Remember, it's crucial to borrow within your means and consider your budget, including ongoing vehicle costs such as insurance, maintenance, and fuel expenses, when determining the loan amount that suits your financial situation.
To estimate your monthly repayments and the total cost of the loan, input the loan amount, loan term and interest rate into the calculator below. This helps you plan your budget and choose the most suitable loan terms.
Balance over time
Lenders consider several factors when assessing your eligibility, including your credit score, income, debt-to-income ratio, age, residency, and required documentation. While meeting the eligibility criteria doesn't guarantee loan approval, having a good credit score, stable income, and a positive financial profile significantly improve your chances.
You are eligible to apply for a car loan if you are:
Applying for a car loan is easy and only takes a few minutes. Get started by filling out some basic information into our application form. We’ll review your information, and someone will be in contact with you to discuss the best option for you from over 40+ Australian lenders.
If you’re eligible for a car loan, and you are happy with the initial quote, you will need to prepare documents such as:
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When searching for a car loan, it's essential to understand the different factors to find the best fit for your needs. From interest rates and fees to loan terms and early payout options, each factor can increase or descrease the total amount you will repay.
When seeking a car loan, it's crucial to pay attention to the interest rate. A lower interest rate means you'll pay less over the loan term. It pays to research and compare rates from different lenders to ensure you secure the best possible rate that aligns with your financial circumstances.
In addition to interest rates, it's essential to consider the fees associated with car loans. These may include application fees, ongoing fees, and early repayment fees. Assess these costs and opt for a loan that offers competitive fees, ensuring you don't incur unnecessary expenses throughout the loan duration.
Comparison rates provide a more comprehensive understanding of the overall cost of a loan by factoring in both the interest rate and any associated fees. When comparing loan options, look beyond the interest rate and consider the comparison rate to make a more accurate assessment of the total cost of borrowing.
Consider the loan term or repayment period that best suits your financial situation. Shorter loan terms may involve higher monthly repayments but result in lower overall interest paid. Longer loan terms may offer lower monthly payments but result in higher interest paid over time. Choose a loan term that strikes the right balance between affordability and minimising interest costs.
Some car loans offer the option of a balloon payment, which is a larger lump sum due at the end of the loan term. While balloon payments can lower your monthly payments during the loan term, they require careful planning. Assess your financial capacity to make the final payment or explore alternatives, such as refinancing or selling the vehicle, before committing to a loan with a balloon payment.
It's crucial to check whether the car loan allows for early repayment without penalty. This feature provides flexibility and the opportunity to save on interest costs by paying off the loan sooner. Opting for a loan that allows early payout can help you become debt-free faster and potentially reduce the overall cost of borrowing.
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