How Much Does A Car Loan Cost?

5 October 2016
Co-author: Regina Collins

Ah, the age-old question, “What does [blank] cost?” If you’ve thought about taking out a car loan, or any type of loan, chances are you’ve thought about the costs involved.

What is a car loan?

A car loan is a loan taken out for the purpose of buying a motor vehicle such as a car, ute, 4WD, motorbike, or other road vehicle. A car loan can also be called a vehicle loan. If you don’t have enough in savings to afford to buy a car but you can afford to repay a loan in monthly instalments, you might consider using a car loan to finance your new wheels.

There are two main types of car loans:

  1. New car loans
  2. Used car loans

A car loan is a common type of personal loan. Personal loans as a category cover a much broader range of loans (e.g. debt consolidation, home improvement, study costs, weddings etc.), so we here at CANSTAR compare personal loans separately on our website.


How much does a car loan cost?

The cost of a car loan depends on how much you borrow, how long the loan term is, and the interest rate charged on the balance of the loan.

Taking on a car loan is not a decision to take lightly and you should always carefully consider you budget before taking on more debt. If you can easily avoid the monthly repayments, and the overall cost of the loan is reasonable, it may be a helpful way to purchase a new set of wheels.

What are the interest rates on car loans?

CANSTAR researches and rates more than 150 car loans and their interest rates vary significantly. Our historically low official cash rate is certainly a benefit; currently on our database, there are more than ten car loans with an advertised interest rate of less than 6%.

At the time of writing, our comparison table for car loans shows that of the car loans on our database that are available for buying both new and used cars, interest rates on offer vary widely.

Canstar star rating and awards - Banks home loan offerings icon Interest rates on our database: Up to 15.00% p.a.
Comparison rates on our database: Up to 15.99% p.a.

That’s a huge difference between minimum and maximum interest rates on offer! So it makes sense to do your homework before you sign up for a car loan, otherwise you could up paying hundreds, or even thousands of dollars more than you need to over time.

Our research shows that people comparing car loans on our website are looking for a car loan for the following amounts.

How much will a car loan cost over time?

Using our Car Loan Repayment Calculator, we’ve calculated how much the monthly repayments would be for a car loan with an interest rate of 8.00% p.a. Of course, the actual cost of buying a new car is much more than just the loan – there’s petrol, registration (rego), CTP, car insurance and roadside assistance, tolls, and servicing. So we’ve added on those costs using the MoneySmart Cars Mobile App to give you a more realistic picture of how much you really need to budget for your new car:

Cost of a New Car:

With a Car Loan vs. Without a Loan

Purchase Price Cost of Car With Car Loan Without Car Loan
$5,000 Monthly Repayment $101/month $0
Monthly Cost $600/month $504/month
Total Cost After 5 Years $37,996 $24,200
$10,000 Monthly Repayment $203/month $0
Monthly Cost $702/month $504/month
Total Cost After 5 Years $44,140 $29,250
$15,000 Monthly Repayment $304/month $0
Monthly Cost $805/month $504/month
Total Cost After 5 Years $50,284 $34,300
$25,000 Monthly Repayment $507/month $0
Monthly Cost $1,101/month $504/month
Total Cost After 5 Years $62,571 $44,400
$35,000 Monthly Repayment $710/month $0
Monthly Cost $1,214/month $504/month
Total Cost After 5 Years $74,859 $54,500
$45,000 Monthly Repayment $912/month $0
Monthly Cost $1,419/month $504/month
Total Cost After 5 Years $87,146 $64,600

Source: CANSTAR Car Loan Repayment Calculator; MoneySmart Cars Mobile App. Loan costs based on an interest rate of 8.00%, 5-year loan term, $180 loan establishment fee, and $10/month loan administration fee. Approximate calculation only for illustrative purposes.

Compare Car Loans with CANSTAR

We regularly research and rate car loans for the value they provide consumers. As interest rates regularly go up and down, you should compare car loans on our website to find what loans have our 5-Star Rating for Outstanding Value.

Check out our comparison table below to view the current market offerings, sorted by Star Rating (highest to lowest) with links direct to the providers’ website. Please note that this table was formulated based on a $20,000 loan for a new car over 3 years in NSW.


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