Compare New Car Loans

There can be considerable differences between a loan taken out to buy a new car and a loan for a used car. For example, you may be offered a different loan type, amount, interest rate or repayment conditions depending on if you are buying a new or used car. That’s because new car loans are typically reserved for vehicles which are around three years or younger and are usually ‘secured’. That is, the car is held as ‘security’ against the loan, so if you can’t repay the loan then the lender can repossess your car in lieu of that payment. The newer the car, the more sure a lender can be of recouping their loss if they sell the car. On the other hand, used car loans are typically a type of unsecured personal loan.

Read more: Secured vs unsecured personal loans

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 pre-approval of a loan (before you have selected a car), typically up to a certain amount and possibly with other conditions, such as details about 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 could use Canstar’s Car Loan Calculator to get an idea of what your repayments will cost you.

Learn more: How do car loans work?

There are a number of different types of loans available to anyone wanting to finance 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.
• Variable rate new car loan: Some car loans offer a variable rate of interest, which means that the interest rate could go up or down, depending on the policy of the lender and the economic conditions of the time.
• 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 debt.
• Unsecured car loan: Where a lender does not hold your car as security on the loan. These types of loans are considered a higher risk by 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 loan rate you’re offered can also vary depending on your credit score. You can get your free credit score from Canstar, and find out more about personal and car loan interest rate ranges.
• Car loan with ‘balloon payment’: Some loans come with a feature that allows you to lower your repayments over the time of the loan on the condition that you pay a lump sum at the end of the loan term.

Learn more: Car finance options – What type of car loan should you get?

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 tool at the top of this page allows you to compare a wide range of car loan products available in Australia. After you enter some general information (you do not have to provide any personal details such as an email address), it will generate a list of car loans on our database, including rates and features. Canstar’s expert research team also reviews and rates car loans, which could help when forming a shortlist of providers to consider. Canstar may earn a referral fee, but this does not influence the Star Ratings featured in the tables.

When comparing 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.
• 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.

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, 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 when it comes to the costs of maintaining that 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 so lenders are likely to charge a higher interest rate to offset that 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 a higher bar when it comes to assessing your creditworthiness.

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 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 are 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.

Typically, when taking out a new car loan, one of the conditions of the loan is that you take out comprehensive car insurance, which typically covers damage to your vehicle, as well as to other people’s vehicles or property, even if you are at fault. It will also cover damage caused by fire, hail and storms, and replacement costs if your vehicle is stolen or written-off. Separately, Compulsory Third Party (CTP) insurance protects you financially if you injure or kill someone in an accident, and is mandatory for Australian drivers in every state and territory.

Check with the lender to find out what car insurance coverage you’ll require as part of your loan agreement.

You could use Canstar’s Car Loan Calculator to get an idea of what your repayments will cost you.  However, your chosen lender should be able to supply you with a breakdown of costs before you sign up for the loan.

A car loan deposit is where you contribute a sum of money (perhaps from your savings) towards the cost of the car, and the lender supplies the rest in the form of a loan. This could reduce the amount of the loan.

You can apply for a car loan a number of different ways. You could go direct to lenders, through a car loan broker, the car dealer or through a leasing company.

Learn more: The best ways to finance a car in Australia

Typically you will need to prove your identity, such as a birth certificate, passport and/or drivers licence; provide details about your bank accounts and financial status (such as your income and outgoings; and details about the car you want to buy and where you want to buy it from. The lender will most likely check your credit history and verify personal details before deciding on whether or not to grant you the loan.

Check your credit score for free with Canstar.

Some lenders do offer ‘green car loans’ and ‘green personal loans’. These loans are typically restricted to those people buying a more environmentally friendly vehicle, such as an electric or hybrid.

Explore further→ What are green loans? How do they compare?