A car loan is a type of personal loan that can be used to purchase a new or used car. Car loans are typically secured by the vehicle you are purchasing, meaning the lender can possess and sell your car in the event that you don’t make the repayments. Because of this extra level of protection for the lender, secured loans, including most car loans, typically have lower interest rates than unsecured loans.
How can I get a low-interest car loan?
There are a few different ways you may be able to get a lower interest rate on a car loan:
- Have a good credit score. Some car loan providers have ‘risk-based’ pricing where the interest you are offered is based on how risky the lender thinks you are. People who have a good credit history will typically be offered lower interest rates.
- Consider purchasing a new car. On average, new car loans have lower interest rates than used car loans. According to Beyond Bank, this is partly because a newer car has a better resale value than a used car. Of course, it can be important to weigh up whether buying a new car instead of a used one is worth it for you, based on factors such as whether the potential savings on interest and maintenance costs over time outweigh the higher purchase price you are likely to pay.
- Consider a loan guarantor. A loan guarantor is someone who agrees to make your car loan repayments if you can’t. According to ASIC’s Moneysmart, some lenders will offer a lower interest rate if you have a loan guarantor. But before you enter into this kind of arrangement, be aware of the risks involved.
- Shop around. Another way to get a low-interest car loan is to compare your options and make sure you are getting the best deal for you.
Who offers low-interest car loans?
Here’s a snapshot of the lowest-rate car loans on Canstar’s database at the time of writing.
You can compare a wider range of car loans using Canstar’s comparison tables, where you can filter the results by the lowest advertised rate or comparison rate. You can also tailor the results according to your preferred loan amount, loan duration and the age of the car you are purchasing. Please note that the results do not take into account your credit history and other factors specific to your loan application.
Compare New Car Loans with Canstar
The table below displays some of our referral partners’ new car loan products on Canstar’s database for a three-year loan of $20,000 in NSW. The products are sorted by comparison rate (lowest to highest), then by provider name (alphabetically). Use Canstar’s Car Loans comparison selector to view a wider range of products on Canstar’s database. Canstar may earn a fee for referrals. Read the Comparison Rate Warning.
Compare Used Car Loans with Canstar
The table below displays some of our referral partners’ used car loan products on Canstar’s database for a three-year loan of $20,000 in NSW. The products are sorted by comparison rate (lowest to highest), then by provider name (alphabetically). Use Canstar’s Car Loans comparison selector to view a wider range of products on Canstar’s database. Canstar may earn a fee for referrals. Read the Comparison Rate Warning.
How can I compare low-interest car loans?
When shopping around for a car loan, a low interest rate is just one thing to look for. Other factors to compare and consider include:
- Is the interest rate fixed or variable? With a fixed rate car loan, your interest rate and repayments will be the same throughout the loan. With a variable rate car loan, the interest rate can increase or decrease during the loan, and your repayments can change as a result.
- What is the comparison rate? Comparison rates take into account the interest rate on a loan, as well as most upfront and ongoing fees and charges. They are designed to give you a closer estimate of the total cost of the loan per year.
- What are the fees? Car loans can come with a range of fees, including an establishment fee, monthly service fees, missed payment fees, extra payment fees and early repayment fees.
- What is the loan term? By taking out a loan with a longer term (the amount of time you have to repay the loan), you will usually be able to make lower repayments. However, it also typically means you will pay more interest over the duration of the loan.
- What are the conditions of the loan? The lender may require the car