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How to get the best rate when buying a car

Mark Bristow avatar
Mark Bristow
- 6 min read
How to get the best rate when buying a car

Cars can be expensive, and you may need to use a car loan or another form of car finance to afford your next set of wheels. But not all car loans are created equal, and the interest rate you’re charged can affect how much you’ll pay for your car, both from month to month and in total.

There are a few options you could consider to try and get the best possible car loan interest rate:

Compare car loans

One of the simplest ways to look for a better car loan interest rate is to look at car loan options from a variety of different lenders, including big and small banks, as well as specialist auto finance providers.

You can use rate tables like on RateCity to compare apples with apples. Using filters, you can enter details of how much you’d like to borrow, as well as your preferred loan term and any other features and benefits you’re interested in. This can narrow your car loan shortlist down to only those best-suited to your needs.

Remember to consider more than just the interest rate on different car loans. Sometimes a car loan’s fees can cost just as much as its interest charges, or even more. Some car loans also come with extra features and benefits that can help offer extra value, which may make their cost worthwhile to you.

You can look at a car loan’s comparison rate to get a better idea of its overall cost, including interest and standard fees. You can also look at the Real Time Ratings™ on RateCity to get a better idea of each loan’s overall value. These star ratings are calculated as you use the site to help ensure they’re up to date, and combine the cost and flexibility of each car loan deal.

Consider buying a newer car with a secured loan

The more you can reduce a lender’s risk, the lower the interest rate they may be willing to offer you. For example, secured car loans generally have lower interest rates than unsecured car loans, as they use the value of the car being purchased as collateral. If you can’t keep up with your repayments and default, the lender can repossess and sell the car to recover their money.

Many car loan providers also consider newer cars to be less risky than older cars, as there is less wear and tear so they’re less likely to be written off after a breakdown or an accident. This means they’re more likely to retain their value for longer, allowing them to serve as collateral for a secured car loan.

Keep in mind though that new cars generally have higher purchase prices than older cars. Even if you can get a lower car loan interest rate, you may need to borrow more money to afford the vehicle.

Check and improve your credit score

Car loan providers use your credit scores as shortcuts to get a better idea of whether you may be a risky borrower. If you’ve successfully borrowed and repaid money on time in the past, you may have a good credit history, and may be offered a lower car loan interest rate. But if you’ve missed repayments or had defaults or bankruptcy in the past, you may have a lower credit score, which could mean paying a higher interest rate on a car loan, or even having your car loan application turned down altogether.

Thanks to Comprehensive Credit Reporting (CCR), it’s possible to improve your credit score over time by recording plenty of positive credit events in your credit history. If you check your credit scores for free and find that they’re on the lower side, you could try taking some time to concentrate on paying off outstanding debts, paying bills on time, and generally improving your credit score. Also, if there are any errors recorded in your credit report, you can contact the relevant parties to set the record straight and hopefully give your credit score a boost.

Consider dealer and manufacturer finance alongside other options

If you’re buying your car from a dealer, they may offer to organise finance for you, to encourage you to close the sale today. However, dealer finance may not always be the best fit for your finances, so it’s important to compare some alternatives as well. In some cases, a dealer may be willing to match or beat the interest rate offered on another car loan.

Similarly, if you’re buying a new car directly from a manufacturer, you may be offered finance on your purchase. A car manufacturer may have less room to negotiate on car finance rates than a dealer, but it doesn’t hurt to check.

Make a deposit

Deposits aren’t always necessary for car loans, though they may be welcomed by the lender. Paying a deposit upfront can lower your loan size, reducing your repayment costs. Also, a deposit may help to lower the lender’s risk, so they may be more willing to lend you money at a lower interest rate.

Choose a no-frills car loan

Some car loans offer a range of optional extra features, from the ability to add extra repayments to the loan, to a redraw facility for accessing this money again, and more. But you get what you pay for – if you’re after a cheaper car loan, choosing an option with fewer features may come with a lower rate and/or fees. Of course, this also means you won’t be able to use the extra features, which could add valuable flexibility to your loan.


If you don’t ask, you don’t get. You may be surprised by what a lender is willing to offer to secure your business as a customer.

Even if a lender won’t lower their interest rate, they may offer to waive your fees, or offer extra features or benefits that could add extra value to their car loan.

Get help from a broker

Much like a mortgage broker, personal finance brokers can help connect borrowers like you with lenders offering deals that suit their needs. Visiting a broker is usually free, as brokers are paid commissions by lenders when they refer new customers to them.

A finance broker may be able to help you work out which car loan options may best suit your needs, which may include special broker-exclusive deals that aren’t normally advertised. A broker may also be able to negotiate with the lender on your behalf to help you get the best possible deal, and even help you complete the paperwork to ensure a smoother, trouble free loan application process.

Compare car loans in Australia

Product database updated 15 Jun, 2024

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.