Compare Car Loans in Australia

If you’re looking at buying a new car it’s really important that you take some time to shop around for the best finance deal.   A car loan is something that you will generally have for up to 5 years, and interest rates can vary between less than 5% to over 20%!

Interest Rate – What Difference Does it Make?

If you compare car loans in Australia you will see what a difference the interest rate makes. For example, if you borrow $30,000 to buy a car and the interest rate is 8% over 5 years, you will pay total interest on the loan of $6,498.  If the interest rate on the same loan is 20% you will pay total interest of $17,689.  That’s more than $11,000 extra in interest to buy your car!!  As you can see, it pays to get the best rate you can!  Interest rates are at historically low levels at the moment so it is possible to achieve a great loan by shopping around.

Interest Rate – Special Introductory Rate Warning

Some loans have a really low interest rate to begin with (to draw you in) but during the term of the loan the interest rate increases to a much higher rate to make up for it.  So if you get a special introductory rate make sure you find out how the interest rate will change for the rest of the time that you have the loan.

Fees and Charges

Now the calculations above don’t consider any fees and charges that the loan might have, and it’s really important that you know what the TOTAL cost of the loan is before you agree to it.  Some loans will have a low interest rate but high fees and charges.  These can include:

  • Application fee or Establishment fee – this varies but can be $250 or more
  • Monthly account fee – with some lenders this is $10 per month
  • Early repayment charge – this may apply if you pay the loan off early, so it is worth being aware of this at the start.
  • Late payment Fee – if your repayment is made more than 5 days after the due date you might be charged $20 each time it happens.

Lump Sum or Balloon Payments

Beware of low interest rates with repayments that don’t actually pay off all of the loan by the end of the loan term.  These loans were set up so that they cost less each month to have the car loan, but they don’t pay off the cost of the loan.  So for the 5 years of the loan you pay smaller repayments but then 5 years later, when your car is probably worth a lot less than when you bought it, there is a big final repayment owing before you own the car.  The lump sum could be $5,000 for example.

Maybe this loan suits you because you knew your pay would increase over the 5 years, after you finish studying and get a full time job, or you were coming in to an inheritance (?!) but make sure you know how much it is and when it is due BEFORE you take out the loan.

Shop Around

So make sure you take the time to find the loan that suits you best.  If that all sounds too difficult (or boring?!) there are even people who can do it for you!  I have a range of loan providers that I use and they can give you a free assessment of the best loan that suits your needs.  I only use companies that provide great loans and great service, so if you want someone else to do the loan shopping for you just visit my Enquiry Form, fill in your details and I will send it to the people who will be the best match for you – let’s get you into your new wheels!

If you have any questions about loans or would like to share your own experiences with comparing car loans in Australia please leave a comment below.  I’d love to hear from you!

4 Replies to “Compare Car Loans in Australia

  1. Hello there,

    We are blessed to have some companies who are willing to do such paper works because numbers are quite off-putting and people does not have the time to think of the best way of making a payment plan by installment. Further, because there are so many loans, they could not be bothered of assessing the pros and cons and this leads to the existence of such companies doing recommendations and analysis.

    1. Hi Tar,

      You’re so right – many people are time poor and this means that while they spend the time looking around at what car to buy, they take the first loan they get approved for. The problem with this is that the easiest loan to apply for is usually the one offered by the car dealer and it is a ‘one size fits all’ product – it doesn’t look at the persons preferences for making repayments, or give them a better interest rate and terms because they have a good credit record, or because they are paying a deposit on the vehicle. Everyone deserves to get the best value loan they possibly can and having someone else doing the shopping around for it can make it a very simple process with a great outcome!

      Have a great day!

      Rachel

  2. Thank you for this informative article on how to shop for the very best car loans. With so many variables to select from it can be really confusing, but this website provides some great insight to people who are looking for a new car and do not want to get ripped off at the dealerships. Can you tell me what impact it would have if your had a poor or fair credit score? What about refinancing your car later down the road? Are there penalties with that?

    1. Hi Steph,
      If someone has a poor credit score it indicates that they have financial problems in their recent history. SO they may have gone bankrupt, or have a lot of unpaid debts against their name. The big banks generally won’t give someone a loan if they have a poor credit history because they can see that they have a track record of being unable to pay their debts – it makes perfect sense really! However, in many cases these are good people who have just had some bad luck. For example, Sue and Max (I’ve changed the names) were both working in good jobs and they have 3 children in primary school. Sue was diagnosed with breast cancer and had to have surgery and then ongoing chemotherapy. She was off work for the best part of a year. They used credit cards and a personal loan to pay the medical expenses, and fell behind on their home loan repayments. Within a year they had gone from being quite comfortably off to having more debt than they could manage as well as being very stressed by it (not what any of them needed when dealing with medical challenges). In situations like this there are lenders who specialise in dealing with people who have poor credit. The interest rate will be higher because it is more risky to lend to this borrower (based on their recent history) than it would be to lend to someone with a clear credit history. But the idea of using these lenders is to get the finances back under control, demonstrate that you can pay repayments on time, and then move to a lower interest loan after a year or two.

      So having a poor credit history reduces the number of lenders that you can deal with, and increases the interest rate. In some cases it might not be possible to get a loan at that point, so then we have to make a plan to improve the financial situation to the point where it is possible to get a loan.

      When it comes to refinancing, the credit report will again determine the lenders you can use, and the interest rate that applies. So it pays to keep your credit report clear of any problems! Just pay your bills before the due date and don’t take on any more cards or loans than you can comfortably afford.
      All the best!

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