Please see information below on Car Loans.


What is a Car Loan?

A car loan is a specialist loan offered by independent loan companies. Provided as an alternative to signing up for the often poorly priced car financing offered by car dealerships, car loans are designed to help you pay for your car.

You can also find car loan brokers who offer to search the market on your behalf, to find the perfect car loan.

What are the Types of Car Loan?

Generally, car loans fall into the following main categories:

  • Personal (unsecured loans)
  • Secured loans
  • Commercial/Business loans
  • Loans for New and Used cars
  • Car Loans for People with Poor Credit

Not surprisingly, it is worth taking your time before you choose your loan and the provider. Using a loan broker could take the hard work out of the search but don't forget they might take a fee for their service.

How Can I Apply?

You can apply very easily via Which Way To Pay Australia we list top car loan companies so you can compare the offers and find one which suits you.

Generally, a car loan company will have a simple application process. This will be like many other loan applications, requiring you to enter your personal details including name and address and your loan requirements (including how much you want to borrow and for how long).

The loan company will then most likely carry out a credit check on you to find out whether or not they can afford to lend to you and what kind of rate to charge you. Once you have been approved they will guide you though every step.

What Should I Look For?

When choosing a car loan, there is much to consider. Here are some key factors which can change according to car loan company:

  • Interest rate

The interest rate of the loan will vary a lot according to loan company. It will also depend on the length of the loan, your credit record and how much you want to borrow.

  • Loan Term

Each loan has its own term that is the length of the loan. Usually it will be between one and five years, though some loans carry on for longer (up to seven years is normal).

  • Fees

An essential factor to check when searching for a car loan is the fees. Make sure you always read the fine print and ask questions wherever necessary. Are there management or annual fees? Is there a penalty for early repayment or if you run into defaults?

  • Repayment Requirements

This is another thing to consider: how often will you be required to make repayments? Some loan companies demand a weekly repayment while others only once a fortnight. Think about what would suit you better and choose accordingly.

What is Car Lease?

Many car loan companies also offer car lease. This is sometimes called finance lease, asset lease or vehicle lease and allows a person to have the use of a car plus all the benefits of owning the car, but the financier keeps ownership of the vehicle.

How Does it Work?

Leasing a car is like renting it the car is bought by the financing company on your behalf. You then pay a monthly 'lease rental' for a set period of time.

Once the term is over you can either choose to pay a final instalment and take ownership of the car, refinance and continue to lease or trade the car in.

Who is Car Lease Suited to?

Lots of companies use car lease for their staff members, sole traders or people who need to use a car for their work.

What is Novated Lease?

Novated lease also known as 'salary packaging' is designed for employees who can lease a car and the obligations under the lease are taken on by their employer. So, the employer pays the regular lease rentals. A novated lease is an agreement between the employee, employer and the finance company.

Why Take Novated Lease?

Novated lease is useful for people who need to use a car as part of their job and want an easy way to pay for it. Any equity that is built up on the car is retained by yourself and you can choose the car too.

The repayments on the lease rental are taken from your pre-tax income so in this way you are gaining a tax-effective system of paying for a car. If you change jobs you can take the car and the lease with it.

For employers, novated lease is beneficial because there are less administrative costs than there would be with providing company cars plus if the employee leaves the company, the car goes with them.

What are the Costs of a Car Loan?

Your loan will vary in cost, depending on the amount you borrow and the size of your repayments. The amount of interest you pay will also make a huge difference to your loan cost. Additionally you may incur fees for a number of factors (see Fees above).

But there are other costs involved in buying a car and it is wise to consider these before deciding to buy a car. These include:

  • Compulsory insurance
  • Optional extra insurance (see our Insurance area)
  • Fuel (petrol/diesel)
  • Maintenance (checkups/annual maintenance)
  • Automobile club membership (for breakdown assistance)

Running a car can cost several thousands of dollars each year. You can manage these by making a budget (don't forget to include your loan repayments in the cost list) and by choosing cheaper fuel, cheaper automobile memberships and of course hunting for a good insurance company offer.

Will my Credit Rating be Affected?

As with any loan, your credit rating is a running factor. Firstly your credit rating/report will be taken into account when the loan provider assesses your application.

If your credit rating is bad, you may be subject to higher interest rates or fees. In some cases, you may be turned down altogether though you can usually find specialist lenders who can take on low credit borrowers.

If your credit rating is excellent, you can usually enjoy a wide range of offers and cheap rates all round.

Your credit report will show that you have taken up car financing and will show any problems you have in repaying the loan. If you fall into serious problems with repayments, this will affect your credit rating in a negative way. That is why it is very important to really take your time before applying for a car loan, or any other type of loan! A poor credit rating will make it harder to borrow in future.


Please Note: is not authorised to give advice under the ASIC (Australian Securities & Investments Commission).

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