Personal Car LoanHow to Find the Best Car Loan in Australia

How to Find the Best Car Loan in Australia

October 30, 2019

It’s exciting to buy a new car, particularly when it’s your dream car. But finding the best price is just half the battle; you need to find the best car loan to finance the purchase.

Whether it’s a secured or an unsecured loan, you’ll need to sift through plenty of options to find the best rate. Secured car loans tend to have rates of 5% to 10% p.a., and your car is used to guarantee the loan. Unsecured loans have no collateral, but their rates are somewhat high, ranging from 7% to 20% p.a.

With the right information at hand, it’s possible to get the best rate and terms for your loan. Here’s what you need to know.

What Is the Best Car Loan in Australia?

When shopping for a car loan in Australia, bear in mind that there’s no one single loan product that’s deemed the best than all others. However, the ideal loan is the one that gets you the car you want, and it has great features with reasonable repayments.

It takes research to find such a loan. You should compare the different rates and fees offered by lenders and understand their terms and conditions. It’s also vital to look at the features of any loan to find an option that suits you best.

For example, a loan that offers a redraw facility is worth considering. The feature allows you to take back your extra repayments if you have an emergency. Also, find out if it’s possible to pay the loan early without penalty. Some creditors can also allow you to pay the loan in a lump sum.

Ideally, the right loan option gives you optimal flexibility in repayment over the agreed loan period.

Which Bank Is Best for a Car Loan?

Traditionally, banks are the go-to option for most people looking for car loans. But there are even more options, including standalone lenders and credit unions. You can also get car financing through the auto dealer you intend to buy the car from.

In Australia, the Big Four banks, including Commonwealth Bank of Australia, Australia and New Zealand Banking Group, Westpac Banking Corporation, and National Australia Bank, dominate the loan market. But that doesn’t mean they offer the best rates.

Other potential lenders include MyState Bank, St. George Bank, Australian Military Bank, Beyond Bank, and IMB Bank. Some of these banks offer better deals than the Big Four banks. The good thing is that you have plenty of options to make loan comparison easier for you.

The best bank for you is the one that offers the best interest rate, flexible terms, reasonable fees, and quality customer service.

What Is a Good Interest Rate for a Car Loan in Australia?

For most secured loans in Australia, interest rates range from 5 percent to 10 percent p.a. The rate you’ll get from lenders depends on your desired car, the amount you want, and the loan term.

If it’s a new car, getting an interest rate in the range of 5% to 7% p.a. is likely to be a great deal. But if you have considerable latitude in negotiation, don’t hesitate to take advantage of it. You’ll be surprised to find out that some lenders are willing to go as low as 4.5 percent just to earn your business.

For an unsecured loan, your loan approval and interest rate depend on your credit history. You’ll need an excellent credit score, which falls between 833 and 1200, to get the best rate. But as long as you have a good score, anything from 622 and above, lenders can be accommodating.

If you want to purchase a used car, interest rates in Australia are slightly higher, about 6 percent to 15 percent. The rate will depend on the age of the vehicle, and it shouldn’t be more than six years old. Also, lenders are likely to reject cars that will be 12 years old or more by the end of the loan period.

Whatever loan option you want, it’s possible to compare rates and find a great rate of between 4.50 percent and 6 percent for any car purchase.

What Is the Best Way to Get a Loan for a Car?

The best way to get a loan for a car depends on how well you meet eligibility requirements set by different lenders.

First, determine if your car is eligible since some lenders have restrictions on the type of car or the age of the vehicle. As noted before, used cars shouldn’t be more than six years. For new car loans, the car shouldn’t be more than two years old. Most experts recommend getting a new vehicle if you want to get a lower interest rate.

The amount you want should also be reasonable. Car loans range from $1,000 to $1,000,000. Each lender has their unique minimum and maximum amounts, so ensure your desired amount is within their acceptable range.

You may also want to look at your credit history and rating before applying for a car loan. Lenders are likely to reject your application is your credit score is below 600. Lack of enough credit history may also be a red flag to many lenders.

When applying, be sure to provide adequate details of your finances and assets. If your net position is strong, it’s easy to secure lower rates. Also, leaving a down payment can earn you the trust of creditors.

Final Thoughts

Getting a car loan in Australia is the easiest path to owning your dream car. But not every loan option out there suits you. Be sure to use a comparison engine to examine potential loans side-by-side to find the best deal possible.

The eligibility criteria differ between lenders, but as long as you’re at least 18 years old, an Australian citizen, and you have all the essential paperwork, you’re good to go. For a secured loan, lenders will also need you to provide the details of the car, including the dealership and the Vehicle Identification Number (VIN).

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