Compare used car loans

Finance Journalist · 12 August 2021
Looking to buy a second-hand car? Canstar can help you compare used car loans, getting you that one step closer to hitting the road.

What is a used car loan?

A used car loan is a type of personal loan that allows you to borrow a specific amount of money to purchase a second-hand vehicle. You can also get new car loans to purchase new vehicles, as well as personal loans to help pay for other costs like renovating your home or consolidating debt.

How do used car loans work?

Like other types of personal loans, used car loans involve borrowing a set amount of money. You then have to repay the amount borrowed, plus interest and fees, over an agreed timeframe. This is known as the loan term. Repayments are typically made weekly, fortnightly or monthly.

What is considered a used car?

A used car is a vehicle that has previously been owned. Some lenders have limits on how old the used car can be in order to be eligible for a loan. This can vary lender to lender. For example, at the time of writing, there are a number of lenders on Canstar’s database that have used car loans with no maximum vehicle age. However, there are other lenders that only offer used car loans for vehicles up to a certain age (such as seven years or five years).

What are the different types of used car loans?

There are two main types of used car loans: secured and unsecured.

Secured used car loan

A secured car loan requires you to provide an asset to be used as security or collateral for the loan. For car loans, the asset may be the car you are purchasing. If you don’t make your loan repayments on time, the lender can repossess your asset and sell it to recover the loan amount. Because of this added level of security, secured loans typically have lower interest rates than unsecured loans.

Some lenders will only offer secured used car loans for vehicles that are under a certain age. Check with the lender what conditions apply and whether it accepts any other type of asset as security.

Unsecured used car loan

An unsecured car loan does not require you to provide an asset as security. If you don’t repay the loan, the lender may take you to court to recoup the loan amount. Unsecured loans typically have higher interest rates compared to secured loans. According to Moneysmart, lenders mainly offer unsecured loans for used cars, rather than new cars.

What is the difference between a new and used car loan?

Although new and used car loans tend to work in a similar way, there are a few differences between them:

  • Interest rates: On average, used car loans have higher interest rates than new car loans.
  • Security: Unsecured car loans are typically offered for used cars, whereas new car loans are often secured.
  • Loan amount: Used cars are typically cheaper to purchase upfront than new cars. This means that you are likely to borrow a smaller amount of money and pay interest on a smaller loan amount.

What impact does your credit score have on a used car loan?

Your credit score may have an impact on whether you get approved for a car loan. To help determine whether to lend you money, lenders will consider a range of factors. This typically includes your credit score, as well as factors like your income, expenses and other debt you have. If you have a bad credit score, you may find it harder to get approved for a car loan.

Your credit score may also impact the interest rate you are offered. Some lenders take into account your credit history when working out what interest rate to offer you. Generally, people who have an excellent credit score may be offered lower interest rates. This is because they are seen by the lender as being less of a risk.

You can check your credit score for free with Canstar. If your score isn’t as high as you’d like, there are steps you can take to help improve it.

How to compare used car loans

If you are considering a used car loan, it’s worth shopping around and comparing your options. In addition to a low interest rate, some other factors to look at include the comparison rate, the fees that are charged, the loan term and whether you can make extra repayments.

Interest rate

The interest rate is the amount of interest you will pay on the loan each year. Interest rates can be either fixed or variable. With a fixed interest rate, the rate is locked in and will stay the same throughout the loan. This also means your repayments will stay the same, which can make it easier for budgeting. With a variable interest rate, on the other hand, the rate may go up or down at any time. This means you could benefit from lower repayments or have to pay higher repayments.

On average, used car loans have higher interest rates than new car loans. You may be able to qualify for a lower interest rate if you have a high credit score. Alternatively, you could see if you are eligible to take out a secured used car loan or consider getting a loan guarantor (after carefully weighing up the pros and cons).

Comparison rate

The comparison rate takes into account the loan’s interest rate, as well as most upfront and ongoing fees and charges. The comparison rate is designed to give you a better estimate of the total cost of the loan each year, so it’s worth looking at this rate as well as the advertised interest rate.


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. Check what fees apply and how much they are.

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 loan term, you will usually be able to get lower repayments. However, it also means you will pay interest over a longer period of time.

Extra repayments

Many lenders will let you make extra repayments on your car loan, which could help you pay off your debt quicker. However, it’s important to check whether any extra repayment fees apply, as well as any early repayment fees (if you repay your loan early). Some lenders also offer a redraw facility so you can access your extra repayments if you need to.

Canstar compares car loans as part of our Personal and Car Loan Star Ratings. Canstar’s expert researchers look at both price and features. Based on this analysis, the top-performing car loans are given a 5-Star Rating. You can use Canstar’s comparison tool to compare car loans and filter them by their Star Rating.

Compare used car loans

You can compare a range of used car loans using Canstar’s comparison tables. You can tailor the results according to your preferred loan amount, loan term and where you live.

Cover image source:  Mikbiz/

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.

Thanks for visiting Canstar, Australia’s biggest financial comparison site*

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.

Share this article