New cars
Finance can be arranged for new vehicles purchased through dealerships or eligible suppliers.
Specialist Finance
Car Loans
Car finance can help spread the cost of a vehicle over an agreed term. The right loan depends on the vehicle, deposit, repayment amount, loan term, fees and whether the finance is secured or unsecured.
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What is a car loan?
A car loan is finance used to purchase a vehicle, with the amount borrowed repaid over an agreed period.
Many car loans are secured against the vehicle being purchased, although unsecured personal-loan options may also be available.
The right structure depends on the vehicle, borrower, loan amount, deposit, term and lender policy.
What vehicles can be financed?
Car finance may be available for a wide range of personal-use vehicles.
Used cars
Used vehicles may also be financed, subject to lender requirements around age, value and condition.
Dealer purchases
Finance can generally be arranged for vehicles purchased from licensed motor dealers.
Private sales
Some lenders may finance private-sale vehicles, although additional checks or documentation may be required.
Electric vehicles
Eligible electric and hybrid vehicles can generally be financed in the same way as other personal-use cars, subject to lender policy.
Secured or unsecured car finance?
A secured car loan uses the vehicle as security for the finance. Because the lender has security over the asset, secured car loans can sometimes offer lower interest rates or higher borrowing limits than unsecured lending.
An unsecured personal loan does not use the vehicle as specific security, but pricing and borrowing limits may be different.
The appropriate option depends on the vehicle, amount required and borrower circumstances.
How secured and unsecured car loans can differ
The structure can affect pricing, lender policy and flexibility.
Interest rate
Secured lending may sometimes offer lower rates because the vehicle supports the loan.
Vehicle restrictions
Secured lenders may place limits on vehicle age, type or value.
Loan amount
Maximum borrowing can vary between secured and unsecured products.
Early payout
Fees or interest adjustments may apply if the loan is repaid early.
Asset risk
Where the vehicle secures the loan, it may be repossessed if the borrower does not meet the loan obligations.
Do you need a deposit?
Some car loans may be available with little or no deposit, while others may require an upfront contribution.
A deposit reduces the amount borrowed and can lower the regular repayment and total interest cost.
However, using a larger deposit also means using more of your available cash upfront, so the right amount depends on your broader financial position.
What is a balloon payment?
Some vehicle finance structures can include a balloon payment, which is an amount left owing at the end of the loan term.
A balloon can reduce regular repayments because part of the principal is deferred until the end.
The trade-off is that a larger amount remains outstanding, and more interest may be paid over the life of the loan.
Things to consider with a balloon
A balloon can help reduce repayments, but it changes the overall finance cost.
Lower repayments
Deferring part of the loan balance can reduce the amount paid each month.
Higher final payment
The balloon must generally be paid, refinanced or otherwise dealt with when the loan ends.
Vehicle value
The expected resale value may be relevant when deciding on the balloon amount.
More interest
Because more principal remains outstanding for longer, total interest can increase.
New or used car?
Both new and used vehicles can potentially be financed, but lender policy can differ.
Older vehicles may have shorter maximum loan terms, different interest rates or tighter restrictions around vehicle value.
The lender may also require the vehicle to fall within an acceptable age range by the end of the loan term.
What will a car lender assess?
The lender generally assesses both the borrower and the vehicle.
Income
The lender will consider whether the borrower has sufficient income to support the proposed repayments.
Living expenses
Regular household and lifestyle costs form part of the affordability assessment.
Existing debts
Home loans, credit cards, personal loans and other commitments are taken into account.
Credit history
Previous repayment conduct and credit enquiries may affect approval and pricing.
Vehicle value
The lender may compare the purchase price with the expected market value.
Vehicle age
Age can affect eligibility, maximum term and loan structure.
What documents may be required?
Requirements vary between lenders and applications.
Identification
Standard identity documents are generally required.
Income evidence
Payslips, employment information or other acceptable income evidence may be requested.
Bank statements
Some lenders may review transaction or salary-credit statements.
Vehicle invoice
The lender may require details of the vehicle, supplier and purchase price.
Existing liabilities
Information about current debts and repayments may be required.
Dealer finance or broker-arranged finance?
Car dealers often offer finance at the point of sale, which can be convenient.
However, convenience does not necessarily mean the finance is the lowest-cost or most suitable option. Interest rates, establishment fees, loan terms, balloon amounts and early payout conditions can vary.
Comparing finance separately from the vehicle purchase can make it easier to see the true cost of the loan.
Interest rate is only part of the cost
Car finance should be compared on the overall loan rather than the quoted interest rate alone.
Establishment fees, monthly fees, loan term, deposit, balloon and early payout costs can all materially affect the total amount paid.
A lower rate can still produce a more expensive loan if the fees or structure are less favourable.
What should be compared?
The full repayment structure matters.
Interest rate
Compare the rate and expected interest cost over the agreed term.
Comparison rate
Where available, the comparison rate can help show the effect of certain fees and charges.
Establishment fees
Upfront costs should be included in the overall comparison.
Ongoing fees
Monthly or account-keeping fees can add to the total cost.
Loan term
Longer terms can reduce repayments while increasing total interest.
Balloon
A balloon changes the repayment profile and final amount owing.
Should you finance the whole vehicle price?
Borrowing the full purchase price can reduce the amount of cash needed upfront, but it also increases the loan balance and total interest cost.
In some circumstances, borrowers may also seek to finance eligible costs associated with the purchase, subject to lender limits and vehicle value.
The appropriate amount to borrow depends on available savings, cash-flow priorities and the overall loan structure.
Refinancing a car loan
An existing car loan may sometimes be refinanced where the remaining payout and vehicle value meet lender requirements.
A refinance may be considered to review pricing, adjust the repayment structure or consolidate suitable debt.
The existing payout amount, refinance fees, remaining term and total future interest should all be considered before changing loans.
Why lender selection matters
Car finance policies and pricing vary between lenders.
Vehicle age
Maximum acceptable vehicle age and loan term can differ.
Credit profile
The interest rate offered may depend on the borrower's credit history.
Income type
Casual, commission and self-employed income may be treated differently between lenders.
Loan amount
Minimum and maximum finance amounts vary.
Balloon policy
Available balloon amounts may differ between lenders.
Fees
Establishment and ongoing costs can materially change the total result.
How I compare car loans
My role as a mortgage and finance broker is to compare the complete vehicle-finance transaction rather than simply looking for the lowest advertised rate.
That means considering the purchase price, deposit, loan amount, term, balloon, lender fees, repayments and total expected cost.
The objective is to make the finance clear before you commit to the vehicle.
A typical car finance journey
Car finance can often be arranged relatively quickly once the required information is available.
- 1
Choose your vehicle or price range
Determine the approximate purchase price and whether you are buying new or used.
- 2
Review your financial position
Assess income, expenses, existing debts and the deposit available.
- 3
Compare finance options
Review suitable lenders, rates, fees, loan terms and balloon options.
- 4
Prepare the application
Provide identification, income evidence and any required supporting information.
- 5
Vehicle details
Provide the lender with the vehicle and supplier information required for final approval.
- 6
Approval
Review the approved amount, interest rate, term, fees and repayment.
- 7
Settlement
Once the documentation is completed, the lender funds the approved vehicle purchase.
Car loan questions
Can I finance a new or used car?
Yes, subject to lender requirements. Vehicle age can affect the available term and lender options.
Do I need a deposit for a car loan?
Not always. Some lenders may offer finance with little or no deposit, depending on the borrower, vehicle and loan amount.
What is a secured car loan?
A secured car loan uses the vehicle as security for the finance until the loan is repaid.
What is a balloon payment?
A balloon is an amount left outstanding at the end of the loan term. It can reduce regular repayments but increases the final amount owing.
Can I finance a privately purchased car?
Potentially. Some lenders accept private sales, although additional verification or documentation may be required.
Can I pay a car loan off early?
Usually, although fees or interest adjustments may apply depending on the loan.
Is dealer finance always cheaper?
No. Dealer finance can be convenient, but rates, fees and loan structures should be compared with other available options.
Can I refinance my current car loan?
Potentially. This depends on the vehicle value, existing payout amount, remaining term and lender requirements.
Does my credit score affect my car loan rate?
It can. Some lenders use credit profile and repayment history when determining approval and pricing.
Can self-employed borrowers get car finance?
Yes, subject to lender requirements. The income evidence required may differ from a standard PAYG application.