Cheap car loans Australia

Let’s take a close look at some of the fees and features you need to consider when looking for a cheap car loan.

Fees

Lenders can charge a range of fees on car loans that can add to the overall cost of the loan. Some common fees include an establishment fee, a monthly service fee, a missed payment fee, an extra repayment fee and early repayment fee.

The comparison rate takes into account most upfront and ongoing fees, but it doesn’t include everything. For example, it doesn’t factor in fees that only apply in certain circumstances, such as an early repayment fee.

Features

The features you get with the loan may help boost its overall value. For example, check if you can make any extra repayments to pay off the loan early without paying a fee. Extra repayments can help to reduce the amount of interest you have to pay on the loan, hence help you pay off the loan faster.

Some loans also offer access to a redraw facility so you can access the extra money you’ve paid on the loan if you need to.

Take care with car loans that offer a ‘balloon payment’ feature. This is a one-off lump sum payment usually made at the end of the loan term. While this can lower your regular repayments, you will generally end up paying more in interest and the loan will cost more overall.

When looking for a cheap car loan you should also consider features such as a fixed or variable interest rate, whether the loan is secured or unsecured, and the duration of the loan.

Fixed or variable interest rate

A fixed rate car loan is one where your interest rate is locked in and will stay the same for the fixed period. This means your repayments will also stay the same, which may help with budgeting.

On the other hand, a variable rate car loan is one where your interest rate can change. As a result, your repayments can increase or decrease if the interest rate changes.

Secured or unsecured

With a secured car loan, you need to provide an asset to be used as security (or collateral) for the loan. With car loans, this is usually the car that you are buying.

If you don’t make the loan repayments on time, you run the risk of losing your car. The lender can repossess your car and sell it to recover the loan amount owed.

With an unsecured loan, you don’t need to provide any security for the loan. The interest rate will usually be higher as the lender doesn’t have that added layer of protection as a secured loan.

A lender can still take you to court if you don’t repay an unsecured loan, according to the Australian Government’s Moneysmart website. Unsecured loans are more commonly offered for used cars.

Loan term

The loan term is the amount of time you have to repay the loan. By taking out a car loan with a longer term, you will usually be able to make lower repayments. But that means you will be paying interest over a longer time period.

You can use Canstar’s car loan comparison table, above, to help you find a cheap loan.

All you need to do is enter the amount of the loan you are after, the loan term, whether it’s a used or new car, and finally the state or territory in which you live.

You can then sort the results in order of monthly repayments, from the lowest to the highest.

You can further filter your results if you want to narrow your search to specific providers or a Canstar rating.

It’s a good idea to compare several providers to look beyond just the monthly repayments to find a cheap car loan that suits your needs.

You might also want to check out the latest comparison rate when comparing your options. A comparison rate takes into account the interest rate plus most ongoing fees and charges. It can help to give you a more accurate estimate of the total cost of the loan to you.

The cheapest car loan can vary depending on your personal financial situation, credit history, and the type of vehicle you’re purchasing. 

Major banks like Commonwealth Bank, Westpac, ANZ, and NAB may offer competitive rates, but smaller lenders and credit unions often provide lower rates or fewer fees. Some lenders also run special offers or promotional discounts from time to time, so it may be worth shopping around. 

It’s important to compare interest rates, fees, and loan features across multiple lenders to find the best option for you.

A secured car loan is backed by an asset, typically the car you’re buying, which acts as security for the lender. Because the lender can reclaim the vehicle if you default, secured loans generally come with lower interest rates. 

In contrast, an unsecured car loan doesn’t require collateral, so interest rates tend to be higher to offset the added risk. Keep in mind, if you fall behind on a secured loan, the lender may repossess the vehicle to recover their costs.

Yes, your credit score can affect the interest rate and terms you’re offered on a car loan. Lenders generally reserve lower rates and more favourable terms for borrowers with higher credit scores, as they’re seen as less likely to default.

A high credit score signals responsible financial behaviour, like making repayments on time and managing debts well, which can make you eligible for more competitive offers. Conversely, a lower score may result in higher interest rates or less flexible loan terms.