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What is a car finance broker?

Car finance brokers are car loan experts, who can use this expertise to help connect Australians buying cars with banks and lenders offering car loan options. Similar to mortgage brokers, car loan brokers can help match you with a vehicle finance option that suits your financial needs, and can help your achieve your car purchase goals, whether you're buying a new car or a used car, privately or from a car dealership.

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How can a car loan broker help me?

Car loan brokers are professionals who deal with vehicle loan applications every day. If you’re applying for your first car loan, or otherwise aren’t familiar with Australia's vehicle finance industry, a broker’s knowledge and experience could help you compare car loans, calculate your loan amount and monthly repayments, and find the best car loan for you. These could include options such as a car loan with a balloon payment or a chattel mortgage, all with competitive rates. 

A car loan broker can also take care of managing the loan application process for you, including negotiating with lenders. A professional broker is likely to have the industry knowledge and skills to deal with multiple lenders effectively. And by getting you set up with pre-approval for your car loan, you can shop for vehicles with confidence. 

Another potential benefit of a car loan broker is that they can provide advice to help with your loan application if you’re in a tricky financial situation. For example, if you’re self-employed, have a bad credit score, or want to bring a guarantor onboard, it may be difficult to secure car loan approval on your own. You can expect an experienced car loan broker to have relationships with lenders that are more likely to approve loans to borrowers in your situation.

Can a broker get you a better deal on a car loan?

While it’s not guaranteed that a broker will secure you the best car loan, chances are you may bag a better deal.

Aside from the fact that car loan brokers have established relationships with a range of lenders, many car loan brokers have access to lenders’ wholesale interest rates that generally aren’t offered directly to borrowers. Wholesale rates are usually lower than the retail rates you’d potentially be offered if you approached a bank.

A car loan broker may also help secure you a better deal than going directly to a lender. Rather than just looking at one lender’s car loan polices and rates, a broker could help you compare options from a wider cross-section of the vehicle finance market, and help you identify the right car finance choice for you.

That said, it’s still important for you to do your own research and compare the car loan options a broker puts in front of you. While a broker can’t recommend a car loan product that’s unsuitable for you or that could put you into financial hardship, you still need to understand the fees, features and interest rates of any prospective car loan you’re comparing. It may even be worth considering weighing up car loan options other than the ones recommended by the broker for a more comprehensive comparison.

Consider looking at each loan’s:

  • Interest rate;
  • Terms and conditions;
  • Upfront and ongoing fees;
  • Loan term, and;
  • Eligibility criteria.

Lenders may regularly change the details of their car loan deals. If you don’t have time to educate yourself on all the vehicle loan options out there, using a car loan broker may save you significant time and hassle.

Who pays a car finance broker?

While it’s often free to visit mortgage brokers, who are paid commissions by lenders for successfully signing up customers, car finance brokers may be paid differently.

Some car loan brokers charge fees for their services, either directly to the car buyer, or to the car finance providers and/or car dealer. Sometimes a broker’s fees to a car dealer or lender end up added onto the cost of the car loan, so the buyer may end up indirectly paying the broker after all.

Consider asking a car finance broker about their fee structure and how they’re paid before engaging their services, to make sure you don’t find yourself having to manage unexpected extra costs later on.

Pros and cons of using car loan brokers
  • Often have access to wholesale interest rates.
  • Able to quickly compare multiple banks and non-bank car loan lenders.
  • Can be more efficient than comparing lenders and car loans by yourself.
  • You can usually just deal with one broker throughout the entire application journey.
  • Can be more convenient to deal directly with your existing bank.
  • Car loan brokers do not have access to every single lender and car loan on the market.
  • May give priority to the lenders they have pre-existing relationships with or offer the highest commission.
  • May sometimes charge a broker service fee or commission or both.

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Where can you find a car loan broker?

Like mortgage brokers, car loan brokers may operate as part of large brokerage firms or franchises, or in smaller family-run businesses.

These days, most car loan brokers can be found and accessed online. Chances are you may even be able to complete forms and paperwork digitally.

You may also find a car loan broker on comparison websites like RateCity, where you’d be able to compare multiple car loan brokers, as well as non-broker car loan options.

Can a home loan broker also be a car loan broker?

While some mortgage brokers specialise solely in home loans, and some car finance brokers specialise in car loans, there are some brokers and brokerage firms that can offer a variety of financial product types.

If you already have a good relationship with a mortgage broker, it may be worth getting in touch to find out if they can also provide car finance broking services. If they’re already familiar with your personal financial situation, this may help you save some time and effort when searching for appropriate car loan options. Additionally, they may be able to offer advice on whether your home loan may be able to affect your car loan application, such as whether you may be able to use equity in your property to help secure a car loan.

What is a finance broker?

Finance brokers help borrowers organise car loans with lenders – that is, they act as middlemen between borrowers and lenders. While lenders will only recommend their own products, finance brokers recommend products from a range of lenders. Finance brokers need to be accredited with a lender to do business with that lender; a typical broker will be accredited with between 10 and 30 lenders. Finance brokers generally don’t charge consumers; instead, they receive commission payments from lenders.

What is a secured car loan?

A secured car loan is a loan that is connected to a form of security, or collateral. Generally, the security for a car loan is the car itself. If you fail to repay the loan, the lender might seize your car, sell it and then use the proceeds to recover their debt.

Where can I get a student car loan?

Student car loans are not a necessarily a product in and of themselves, but what you may be looking for is a guarantor car loan.

A guarantor car loan has a third-party act as a form of guarantee for your loan application, telling the bank or lender that if you default on your loan, someone will pay the loan repayments.

Going guarantor on a car loan is no new thing, and before internet-based credit scores, guarantor car loan applicants would apply for loans with a guarantor or property owner who could vouch for the person borrowing the loan.

To get a guarantor car loan, you’ll need someone willing to act as a guarantor for your car loan.

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.

What is a guarantor car loan?

A guarantor car loan is a type of loan that features a guarantor on the agreement. The guarantor is a third-party individual, often a friend or relative, who guarantees the loan will be repaid if the borrower defaults on the car loan.

Guarantor car loans are often geared at people who might otherwise struggle being accepted for a secured car loan when purchasing a vehicle. Some of the reasons might include a lack of credit history such as with a student or young person, if there’s bad credit, or age as a factor such as with pensioners.

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

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