Compare New Car Loans

What is a new car loan?

A new car loan is one that is taken out to pay for a brand new vehicle, such as when you purchase a new car from a dealership. Depending on the loan type, it could cover the entire cost of the vehicle, or you could contribute a deposit and then finance the remaining cost of the car with a car loan. Either way, you’ll sign an agreement with the lender to repay the loan, with interest, in regular instalments over a set period of time.

How does a new car loan work?

To get a new car loan, you typically need to know which car you’d like to buy, so that the lender can assess the value of the car as part of the loan approval process. However, there are some lenders that offer car loan pre-approval (before you have selected a car), typically up to a certain amount and possibly with other conditions, such as restrictions on the age of the car.

When you enter a contract for a car loan, the amount of money you borrow has to be paid back within a certain period of time (called a term), usually in regular repayments. The length of the term can vary from around 12 months to 10 years, depending on the lender you choose and the agreement you reach with them. In addition to requiring you to pay back the amount you borrow, lenders will also charge you interest on the balance, at either a fixed or variable rate, plus any fees and charges.

You can use Canstar’s Car Loan Calculator to get an idea of what your repayments might cost you.

What types of new car loans are there?

There are a number of different types of loans available when financing the purchase of a new car. These include:

• Fixed rate new car loan: Some car loans offer a fixed rate of interest, meaning that the interest rate is locked in for all, or part of, the loan term. This may make the loan easier to budget for as your repayments are likely to stay the same while the interest rate is fixed.
• Variable rate new car loan: Some car loans offer a variable rate of interest, which means that the interest rate (and your repayments) could go up or down, depending on the policy of the lender and the economic conditions of the time (i.e. a change in the cash rate).
• Pre-approval car loan: Some lenders will grant approval of a loan before you have found a car to buy. This can be helpful when you haven’t decided what type of car you want, or you’re not sure how much you’d like to spend buying a new car. Pre-approval typically expires and has to be renewed periodically if you don’t find a car in time.
• Secured car loan: Where the lender holds the new car as ‘security’ or ‘collateral’, meaning that they give you the loan on the condition that if you fail to meet the loan conditions (such as paying it back on time), they can repossess the car and sell it to recoup the remaining debt.
• Unsecured car loan: Where a lender doesn’t hold your car as security on the loan. These types of loans are considered a higher risk to lenders, and so anyone applying for one may face a more rigorous application process. The lender will also most likely heavily rely on your credit history when considering your application. These loans will also often have a higher interest rate attached due to the higher risk to the lender. The interest rate you’re offered can also vary depending on your credit score. You can check your credit score for free with Canstar or via the Canstar App.
• Car loan with ‘balloon payment’: Some loans come with a feature that allows you to lower your repayments over the life of the loan on the condition that you pay a lump sum at the end of the loan term.

How to compare new car loans

When comparing new car loans, it could be a good idea to consider the:

• interest rate, including the advertised interest rate, the comparison rate, and if it’s a fixed or variable rate loan
• conditions of the loan, such as if it’s a secured or unsecured loan, and any other terms and conditions listed in the lender’s documentation and the Target Market Determination (TMD)
• loan term, which means how long you have to pay off the loan
• fees, which could include application and/or documentation fees and ongoing fees (such as an annual or monthly account keeping fee)
• penalties, which could include fees for missed payments or early repayment fees, as well as what happens if you fall into arrears on your loan, such as repossession of the car
• ease with which you can pay the loan and see the balance, such as if the lender has an app or online portal and if it is simple to use
• customer service, such as how you contact the lender if you have a problem with your loan.

Who has the best new car loan rates in Australia?

The car loan market is a competitive one, and rates change frequently, so it could pay dividends to shop around to find the best deal. This includes considering aspects such as the interest rate, term of the loan, fees, conditions and any other features of the loan. The lowest interest rate may not necessarily mean the best deal for your personal needs.

The comparison table at the top of this page allows you to compare a range of car loan products from our Online Partners. You can also change the table’s filters to better suit your requirements. The table shows a car loan product’s interest rate, comparison rate, estimated monthly repayment and Star Rating.

Our expert Research Team also reviews and rates car loan products and lenders as part of Canstar’s Personal and Car Loans Awards. The awards recognise the lenders that provide outstanding value to borrowers through their suite of loan products. These Star Ratings and awards may help you form a shortlist of providers to consider. Canstar may earn a referral fee, but this does not influence the Star Ratings featured in the tables.

It’s also important to read any relevant loan documentation, such as the Product Disclosure Statement (PDS) and TMD, for any loan product you’re considering.

Pros and cons of new car loans

As with any financial product, there are advantages and disadvantages to taking on a new car loan. These pros and cons will depend on your personal circumstances and needs when it comes to taking out the loan.

Possible advantages of a new car loan

• A new car loan could help you to buy the car you want, by topping up your savings or providing the full amount needed to cover the cost of the car.
• A new car loan could allow you to buy a new car that has a warranty, which could help financially if there were to be issues with the car.
• Taking out a new car loan, as opposed to a different type of loan such as a personal loan, may mean that you could potentially be offered a lower interest rate if the loan is ‘secured’. Unsecured loans are typically considered a higher risk debt and lenders are likely to charge a higher interest rate to offset this risk.
• For some people, getting approved for a new car loan may be easier than other types of loans, because a new car loan is typically a ‘secured’ loan. Unsecured loans, such as some other types of car loans or personal loans, are considered to be higher risk and so the lender would apply stricter eligibility when it comes to assessing your application.

Possible disadvantages of a new car loan

• A new car loan is a debt, which needs to fit into your budget over the long term. You’ll pay interest and fees on that loan, which means you will typically pay more back to the lender than what the car originally cost you. New cars also tend to depreciate or lose value over time. So, if you have to sell the car, it could be possible that the proceeds might not be enough to pay out the remaining loan. In this scenario, you could be left with no car and a debt. It’s important to consider how this type of scenario could impact your lifestyle when taking out a new car loan.
• As with any loan, a new car loan is a type of debt that needs to be repaid, with interest, over a set period of time. Not following the rules of the loan, such as missing a payment, could mean you’re charged penalties (such as a fee), and you could even risk having your car repossessed and sold by the lender to recoup their debt. If the lender is not able to recoup all their debt by selling the car, you may end up still owing money to the lender (even though you no longer own the car).
• New cars generally cost more than used cars, which means that you may have to take out a larger loan if you decide to buy a new car.