How to find the cheapest car loans on offer

Finance Journalist · 13 August 2021
The cheapest car loan isn’t necessarily the one with the lowest interest rate. It’s also important to factor in any upfront and ongoing fees, as well as loan features that may boost the value you get overall.

Compare car loans

Compare a range of car loans using Canstar’s comparison tables. You can filter the results according to your preferred loan amount, loan length and whether you are intending to buy a new or used car. You might like to filter the results by products with the lowest comparison rate. The comparison rate takes into account the loan’s interest rate, plus most upfront and ongoing fees. It’s designed to give borrowers a better idea of the overall cost of a loan per year.

How can I find a cheap car loan?

One of the best ways to find a cheap car loan is to shop around and compare your options. As well as looking for a low interest rate and comparison rate, it’s important to consider the specific fees charged and features available.

Your credit score may also impact the interest rate you are offered. Some lenders look at your credit history when determining what rate to offer you. If you have an excellent score, you may be offered a lower interest rate as you are seen as less of a risk to lend to. You can check your credit score for free with Canstar. If your isn’t as high as you’d like, there are steps you could take to help improve it.


Lenders can charge a range of fees on car loans, which add to the overall cost of the loan. Some common fees include establishment fees, monthly service fees, missed payment fees, extra repayment fees and early repayment fees. Although the comparison rate takes into account most upfront and ongoing fees, it does not include everything. For example, it doesn’t factor in fees that only apply in certain circumstances (such as early repayment fees).


The features you get with the loan may help boost it’s overall value. Check if you can make extra repayments and 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 and help you pay off the loan faster. Some loans also offer access to a redraw facility so you can access the extra money you have 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 interest and the loan will cost more overall.

Other factors to consider

Here are some other factors to consider when comparing car loans.

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 purchasing. If you don’t make the loan repayments on time, you run the risk of losing your car. The lender is able to 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. However, because you don’t have that added layer of protection, the interest rate will usually be higher. The lender can also still take you to court if you don’t repay the loan. According to Moneysmart, 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, it also means you will be paying interest over a longer time period.

Canstar compares car loans using a unique and sophisticated Personal and Car Loans Star Ratings methodology, which considers both price and features. The ratings represent a shortlist of products, so you can narrow down your search to car loans that have been assessed and ranked.

Cover image source: F8 studio/

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This content was reviewed by Sub Editor Jacqueline Belesky and Finance and Lifestyle Editor Shay Waraker as part of our fact-checking process.

Tamika covers personal finance for Canstar, specialising in banking and general insurance. She joined the team after completing a Bachelor of Journalism and Bachelor of Laws (Honours) at QUT. She has previously written for a range of news, music and arts publications.

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