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Which eco-friendly car should you buy?

Which eco-friendly car should you buy? | RateCity

Whether you are looking for an SUV to accommodate your growing family or a compact city car to zip through the traffic, there are some eco-friendly options out there that could help you save money and reduce your impact on the environment.

Which are the best eco-friendly cars on the market?

Cars are major culprits when it comes to air pollution in urban areas. In Australia, your car is one of the fastest-growing sources of emissions and among the top three sources of emissions overall. 

Switching to public transportation or walking it down can help reduce emissions to an extent by reducing the reliance on private cars. Still, it's not entirely possible for everyone to stop using private cars. However, it's possible to make environmentally-friendly choices by purchasing a fuel-efficient green car that runs on technology that's kinder to the environment than conventional cars. 

Green cars, or eco-friendly cars, are those vehicles that have reduced emissions. Their carbon footprint is smaller than traditional gas, petrol, or diesel cars. Most fuel-efficient petrol, electric, and hybrid cars fall in this category. However, the performance of these cars is not the same. 

Your running costs and carbon emissions will depend on the model you purchase and also the type of fuel or technology that powers it. The Green Vehicle Guide can help you compare the environmental performance of different models and calculate their running costs. The site also lists the best performing eco-friendly cars in terms of environmental performance. 

The top five cars in the category in June 2022 are: 

  • Hyundai Ioniq

    Hyundai Ioniq

  • Hyundai Kona


  • Tesla Model 3

    Tesla Model 3 | RateCity

  • Lexus UX 300e


  • Kia Niro


Which is the safest eco-friendly car?

An eco-friendly car is a great choice to save some money and reduce your carbon footprint. But the market is flooded with options, and not every eco-friendly car will tick all the right boxes for you. So, how do you go about choosing the best eco-friendly car for you? 

One of the first things you need to decide before buying a car is its size and purpose. Are you looking for a family car to take your kids to school and run errands throughout the day? Or do you need a compact city car to drive down to work? 

Another crucial aspect that you cannot compromise on is safety. ANCAP Safety ratings could thus provide a convenient starting point to search for reliable, eco-friendly cars.

The Australasian New Car Assessment Program, also known as ANCAP Safety, crash-tests cars and awards them ratings that range between one to five stars. These ratings are based on four safety metrics - Adult Occupant Protection; Child Occupant Protection; Vulnerable Road User Protection; and Safety Assist or use of safety-enhancing devices. 

You can visit the ANCAP website and set the category to the type of car you wish to buy, such as small car, medium car, medium SUV, large SUV, etc. This will throw up a list of vehicles with their safety rating and fuel type mentioned next to the make and model. You can sort the ratings by the latest rating year to find the safest cars to buy, as ANCAP Safety's rating criteria are updated every year even though the ratings remain valid for up to six years. Check for electric and hybrid vehicles on the list to purchase an eco-friendly car.

Financing your eco-friendly car

Purchasing an eco-friendly car could be good for your pocket in more ways than one. Many credit providers offer green car loans specifically for buying eco-friendly cars. They generally offer more competitive interest rates or waive some of the fees and charges to incentivise buyers for making an environment-friendly purchase. 

Some lenders also offset your carbon emissions for the duration of your loan. However, lenders typically offer these loans for specific car types, and it's worth checking your preferred green car loan provider's lending criteria to see whether the car you want to buy is eligible for a green car loan or not. 

Even if a green car loan is not an option, you can still find plenty of car loans with competitive interest rates, especially if you are buying a new car. You might want to read this informative guide to learn more about choosing the right car loan for you.

Questions you may have

What is a car loan?

A car loan, also known as vehicle finance, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Car loans can be used for both new and used vehicles.

How do you get a car loan?

There are four different ways you can get a car loan. You can go straight to a lender. You can get a finance broker to organise a car loan for you. You can get ‘dealer finance’ – which is when the car dealer organises a car loan for you. Or you can organise your own car loan through a comparison website, like RateCity.

Whichever method you choose, you will need to provide proof of identification, proof of income and proof of savings. So you may be asked for any combination of passport, driver’s licence, bank statements, payslips, tax returns and utility bills. You might also be asked to provide proof of insurance.

Can you refinance a car loan with the same lender?

You may be looking to refinance your car loan to get lower interest rates or reduce the total monthly amount you have to pay. Often, this leads to the question ‘can I refinance a car loan with the same bank?’

While it’s always worth shopping around for a better deal or at least to compare offers from other lenders, you can sometimes refinance to a different loan with the same lender. It may be simpler,  as the lender already has your details and knows your repayment history. 

Having said that, knowing the terms offered by other lenders may help you negotiate a better deal with your current lender.

How does a car loan affect credit score?

When a lender does a credit check during the pre-approval and full application process, it’s noted on your credit report as an inquiry, which can impact your credit score and chances of approval. If you approach too many lenders for pre-approval, especially in a short period, these inquiries will likely hurt your credit score. Multiple attempts to get your car loan application through can affect your credit score. 

Every time you fail to make repayments on time, it is recorded on your credit report. Inability to pay your car loan installments on time can have a long term effect on your credit score. Further, if you’re unable to pay your car loan, a repossession will be on your credit file for seven years and impact your credit score.


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



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