How Car Loan Rates Are Set in Australia
How lenders decide what interest rate to offer on a car loan, and what you can do to put your best application forward. When you're ready, tell us about the car and your situation and we'll pass your enquiry to a licensed finance broker who works with a range of lenders. It takes about 60 seconds and there's no credit check to enquire.
- No credit check to enquire
- Free to enquire, with no obligation to go ahead
- A licensed broker calls you, usually within one business day
Check my eligibility
About 60 seconds. No credit check to enquire.
Who we help
- Buyers comparing a dealer offer: who want to know how it stacks up
- People with solid credit and stable income: who want to make sure that shows in their application
- First-time borrowers: working out what lenders look at
- Business owners and ABN holders: weighing a chattel mortgage against a consumer loan
- Anyone thinking about refinancing: an existing car loan
What lenders look at when pricing a loan
Most car lenders use risk-based pricing: the lower the risk they see, the sharper the rate they're likely to offer. These are the main things they weigh.
| Factor | What tends to help |
|---|---|
| Credit history | A clean repayment history and few recent credit enquiries. |
| Income and employment | Stable, verifiable income and time in your job or business. |
| Existing debts | Lower credit card limits, fewer personal loans and buy now pay later accounts. |
| Deposit | A deposit or trade-in lowers the amount the lender has at risk. |
| The vehicle | Newer vehicles generally attract better pricing than older, high-kilometre ones. |
| Secured or unsecured | A loan secured against the car is usually priced lower than an unsecured personal loan. |
| Loan structure | The term and any balloon affect both the rate offered and the total interest you pay. |
Why the rate isn't the whole story
A small difference in rate adds up over a loan, but fees, balloons and the term can matter just as much. Example only, on $30,000 over 5 years with no balloon or fees:
| Example rate | Approx. monthly repayment | Approx. total interest |
|---|---|---|
| 7% p.a. | $594 | $5,642 |
| 9% p.a. | $623 | $7,365 |
| 12% p.a. | $667 | $10,040 |
These are illustrations, not offers. Compare loans using the comparison rate, which includes most fees and charges, and look at the total amount you'll repay. A balloon lowers the regular repayment but you pay interest on it the whole way through and still have to pay or refinance it at the end. Dealer promotional rates can be genuine, but check whether they come with a higher drive-away price, a large balloon or other conditions.
Practical ways to strengthen your application
- Check your credit report first and fix any errors before a lender sees them.
- Reduce or close unused credit: lenders count your credit card limits, not just the balance.
- Save a deposit if you can, even a modest one.
- Keep your bank statements tidy for a few months: no dishonours, regular savings.
- Avoid multiple applications: a broker can usually tell you which lenders are likely to suit before anything is lodged.
- Choose the term and balloon deliberately, not just to hit a weekly figure.
How it works
- Tell us about the vehicle and your situation in the short form below.
- A licensed broker calls you, usually within one business day, to talk through your options.
- If it suits you, they handle the application with a lender that fits your circumstances.
What you'll usually need
- Photo ID and driver licence
- Recent payslips, or BAS, tax returns and notices of assessment if self-employed
- Bank statements, usually for the last three months
- Details of existing loans, credit cards and their limits
- Details of the vehicle, plus any deposit or trade-in
- A quote or offer you've already received, if you want it compared
Every lender has its own criteria, so your broker will tell you exactly what's needed for your situation.
Guides on rates and loan costs
- What credit score do lenders look for?
- How to calculate the true cost of a car loan
- Balloon payments: what you need to know
- Fees to watch for in car finance
- Dealer finance vs bank loans
- Lowering your rate by refinancing
- Should you apply for multiple pre-approvals?
Common questions
What credit score do I need for a good car loan rate?
There's no single cut-off. Each lender uses its own scoring and looks at your whole file, including repayment history, defaults and recent enquiries, alongside your income and the car. A clean recent history generally helps most.
Does a bigger deposit get a better rate?
It can. A deposit reduces the amount the lender has at risk, which some lenders reflect in pricing. It also means you borrow less and pay less interest overall.
Are new car loans cheaper than used car loans?
Often, yes. Many lenders price loans on newer vehicles more sharply than older or high-kilometre ones, because the security is worth more and easier to value. It varies by lender.
Is a balloon payment a good way to lower repayments?
It lowers the regular repayment, but you pay interest on the balloon for the whole term and must pay or refinance it at the end. It suits some people, but the total cost is usually higher.
Does enquiring affect my credit score?
No. Filling in our enquiry form isn't a credit application. A credit check only happens if you choose to go ahead with an application through the broker.