Best Car Loan Rates Comparison

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    Lowest car loan rates in Australia

    The very cheapest car loan rates in Australia currently start from 5-6% p.a. These top rates are only for borrowers with the highest credit scores, buying a brand new vehicle.

    The exact rate of interest you’ll pay on your car loan will depend on a whole range of factors, including the type of car you’re buying and the kind of finance you want. Here are the lowest rates currently available for different loan types, based on MNY’s analysis.

    Lowest variable rateLowest fixed rate
    Base rateComparison rateBase rateComparison rate
    New car (0-2 yrs)5.89%6.95%5.49%6.20%
    Used car (2-5 yrs)6.29%7.35%5.76%6.55%
    Unsecured car loan6.54%7.50%5.76%6.55%
    Electric car5.49%8.31%

    As the table shows, new cars and electric cars generally have the best interest rates available. Used car loans tend to cost more. This can impact the calculation for whether it’s better to buy a more expensive new car (with a potentially lower interest rate) or a cheaper used car at a higher rate. In some cases, the more expensive car at a lower interest rate could work out cheaper overall, particularly with longer loan terms.

    What’s the average car loan rate in Australia?

    It’s one thing knowing what the lowest car loan rates in Australia are, and another thing to know what the average borrower actually pays

    According to the Reserve Bank of Australia (RBA), the average interest rate on a fixed term car loan is 8.57% p.a., which is considerably higher than the lowest rate available right now.

    The reason for this is that car loan interest rates usually come in ranges – typically between around 6-20% p.a. The rates can be even higher on bad credit car loans.

    Where in that range your car loan rate will come down to a range of factors that lenders look at. Knowing what these are could help you secure the lowest rate you can.

    What affects car loan interest rates?

    Car loan interest rates are determined by the lender based on their own costs and policies, the vehicle being purchased, and the credit history of the buyer. To find the best car finance rates in Australia, there are the factors you have to consider.

    • Credit score

      Having a good credit score indicates to lenders that you are trustworthy, which generally leads to better interest rates.

    • Age of the vehicle

      Car interest rates tend to be lower for newer vehicles.Used cars have lower resale values, so the lender charges higher rates.

    • Loan term

      Getting a longer loan term may help you get a lower interest rate. However, you may end up paying more in interest overall.

    • Loan to value ratio

      A larger deposit means you’re loaning a smaller portion of the overall value of the car, which is optimal for lenders.

    Other factors that could affect your rate

    Loan security. Secured car loan interest rates are cheaper than unsecured personal loan rates because the car itself is collateral, which means the loan carries less risk for the lender.

    Credit history. Your choice of lender: The same borrower could get a quote from two different lenders for exactly the same vehicle, and get back two very different interest rates quotes. Specialist online lenders typically offer the cheapest rates.

    Brokerage fees.  If you get a car loan through a broker, the effective rate you pay may be higher due to brokerage fees. These should be reflected in the loan’s comparison rate.

    Your financial and employment situation. Lenders consider your employment status and history, and how secure your financial situation is. For example, how much other debt you have and whether you own your own home.

    Fixed versus variable interest rate. Rates vary between fixed and variable rates. A fixed rate is locked in for a set period, while a variable interest rate could change based on market factors.

    Loan documentation. A full-documentation loan involves providing more paperwork to support your application, but the outcome is usually a better interest rate. A low-documentation loan will mean a higher rate since your financial history is less clear.

    Be wary of deceptively low car loan rates

    While searching for the best car rates, you may spot super low interest rates and assume they’re automatically the best deal. But it’s important to dig deeper to understand how the interest rate really works over the entire duration of the loan.

    The exact rate of interest you’ll pay on your car loan will depend on a whole range of factors, including the type of car you’re buying and the kind of finance you want. Here are the lowest rates currently available for different loan types, based on MNY’s analysis.

    A common marketing tactic from loan providers, particularly when offered through car dealerships, is to advertise 0% or 1% car loan interest rates. While this might sound like a great deal, in reality the 0% interest rate will likely only apply for the very beginning of the term, and will later revert to a higher rate.

    For instance, the interest might be 0% for one year but then 15% for the next six years. This would be much more expensive than just paying 5% for all 7 years. These 0% interest promotional deals are often limited to specific car makes and models, reducing the freedom that you have as a buyer. The best way to get the facts is by seeing what other customers are saying about the dealership.

    How to find the best car loan rates in Australia: 5 top tips

    Here are some tips and strategies for getting the cheapest car loan rates possible:

    • Be aware of the average market interest rates: When you compare car loan rates from several providers, you’re less likely to get overcharged.

    • Don’t limit yourself to the major lenders: It’s often smaller lenders who offer the cheapest car loan rates. Even if it’s a lender you’ve never heard of, it’s worth looking into options beyond the major banks.

    • Negotiate on price: Don’t be afraid to haggle and can ask for a better rate than what is initially offered. This is true whether you’re taking out a new loan or refinancing your car loan. You can also try to get a novated lease to help cut down the price by reducing your tax liability.

    • Buy directly from the dealership.: All things being equal, lenders prefer that you buy from a dealer than a private sale, as it’s less risky for them. There may be interest rate discounts available to reflect this.

    • Buy a new or newish car: Even if the vehicle itself is more expensive, you may still end up ahead if you buy a new or newish car that’s eligible for a lower interest rare than an older model.

    Car loan interest rates FAQ

    Why are secured car loans cheaper?
    Since a secured car loan uses the vehicle itself as the collateral, the loan is seen as less risky by the lender. This usually enables them to offer cheaper interest rates.
    What is the comparison rate for a car loan?
    A comparison rate includes both the advertised base interest rate as well as fees and charges that will factor in the total cost of the loan. Checking the comparison rate helps ensure you are actually getting the cheapest car finance interest rates available after all the fees are included.
    Are car loan rates negotiable?
    Yes, you can absolutely ask the lender to cut you a better deal if their proposed interest rate is too high. They may be prepared to offer a lower rate to secure your business.
    Which bank has the best car loan rates?
    This can vary often, as lenders change their interest rates frequently. It can also be different depending on your circumstances, because car loan interest rates are often tailored to an individual based on their credit score and other factors.
    Can I refinance my car loan to get a better rate?
    If you picked one company and then found cheaper car loan rates elsewhere, you can switch over to get that lower rate. Bear in mind you may be charged exit fees by your current lender, as well as setup fees by the new lender. This might cancel out any potential savings. Be sure to research the overall cost of a new loan, and don’t assume that a lower advertised interest rate automatically translates to lower costs.

    The bottom line for car loan interest rates

    Searching for the best car finance rates in Australia is not easy, since there are countless loan providers with many different kinds of offers. However, you can set yourself up for success by learning the average interest rates on the market, understanding what factors go into calculating an interest rate, and becoming familiar with common interest rate pitfalls. Be sure to check out our other articles on finding affordable car rates.