New vs Used Car Finance: What Changes?

You're looking at a car. Same model is available new and three years old with 45,000 km on the clock. The used one is cheaper to buy, obviously. But what actually changes on the finance side? The rate, the deposit, the loan term, and sometimes whether you can even get a secured loan at all.

Why lenders price new and used cars differently

When a lender approves a car loan, they're lending against the vehicle as security. If something goes wrong and they need to recover the asset, what matters is what the car will be worth at the end of your loan, not what you paid for it today.

A new car's depreciation curve is predictable. Lenders know roughly what a 2026 Toyota Corolla will be worth in five years because they have decades of resale data. A seven-year-old car is harder to value going forward. Its residual is less certain, and that uncertainty shows up in your interest rate.

That's the core reason used car loans attract higher rates. It's not a penalty for buying second-hand. It's the lender pricing the risk on their security.

What the rate difference actually looks like

As of mid-2026, new car loan rates from competitive lenders start from around 5.67% p.a. and typically sit in a range up to about 7.5% for borrowers with decent credit. Used car loans start from around 6.99% p.a. and can climb depending on the age of the car, your credit profile, and whether the loan is secured or unsecured. The average secured car loan rate for prime borrowers sits at roughly 7.48% p.a.

To see what that rate gap actually costs, here's the same $25,000 loan at a typical new-car rate vs a typical used-car rate:

On a $25,000 loan, the used-car rate premium costs you about $22 extra per month, or roughly $1,287 more in interest over five years. It's a real cost, but it's not dramatic. The bigger factors that change your finance on a used car are the deposit, the loan term limits, and whether you qualify for a secured loan at all.

The sweet spot: near-new and demo vehicles

Most lenders treat demo vehicles and cars under one to two years old the same as brand new for pricing purposes. That means you can buy a demonstrator with 5,000 km on it, save $3,000 to $8,000 off the new price, and still qualify for the lowest rate tier.

If you're weighing up new vs used, the one-to-two-year-old bracket often gives you the best of both worlds: lower purchase price, new-car finance rates, and a vehicle that still has most of its factory warranty left.

The age limit that catches people off guard

Most lenders have a rule that the car can't be older than 12 to 15 years at the end of the loan term. This doesn't matter much for newer vehicles, but it can seriously limit your options on older cars.

If you're buying a car that's already eight years old and the lender caps at 12 years end-of-term, the longest loan you can get is four years instead of five. That pushes your monthly repayments up because you're paying the same amount back in less time.

And if the car is too old for any secured loan, you may need an unsecured personal loan instead. Secured used car loans typically start from around 6% p.a., while unsecured personal loans often start from 8% and can go significantly higher, because there's no asset backing the loan.

How much deposit you'll need

Lenders treat deposits differently for new and used cars.

For a new vehicle, many lenders will finance up to 100% of the purchase price, and some will go beyond that to cover on-road costs like registration, stamp duty, and insurance. A zero-deposit loan is common on new cars.

For used vehicles, lenders often cap financing at around 80% of the car's value. That means you'll likely need to put down 10% to 20% as a deposit. On a $20,000 used car, that's $2,000 to $4,000 upfront.

Putting down a deposit on any car loan, new or used, will typically get you a better rate and lower total cost. Even $2,000 to $3,000 can shift the rate tier you're offered.

What to do next

Before you decide between new and used, work out your total budget, not just the purchase price. Factor in insurance, registration, stamp duty, servicing costs, and fuel. A newer car might cost less to insure but more to finance. An older car might be cheaper upfront but cost more in maintenance.

If you're leaning towards a used car, run it through the Emu Money Used Car Scorecard before you commit. It walks you through the key checks, from the car's age and condition to how lenders will assess it, so you know where you stand before you apply.

Get pre-approved before you start shopping. Pre-approval takes a few minutes, it doesn't affect your credit score, and it locks in a rate so you know exactly what you can afford. It also gives you negotiating power at the dealership because you're not relying on dealer finance.

If you're comparing options, Emu Money can show you rates across 50+ lenders for both new and used vehicles in minutes. Compare car loan options.