Car loans calculator
From turbo-engine four-wheel drives that pack a heap of grunt, to the quietest, most fuel-efficient machines for improved sustainability, when it comes to cars, everyone has a different taste. To make your car dream a reality, you'll need an affordable car loan that matches your goals and circumstances.
Anyone wanting to buy a car in Australia is likely going to end up comparing car loans. Cars can be expensive, and chances are you're going to need some kind of financing to help you purchase your dream vehicle. A simple way to start the process is by using RateCity’s Car Loan Calculator.
How does RateCity’s Car Loan Calculator work?
There are three things you’ll need to know to use RateCity’s Car Loan calculator:
- How much you plan to borrow – This is typically the value of the car you plan to buy, though some car loans can also include other expenses, such as insurance costs, fees and extended warranties, as part of the loan. Keep in mind that the more money you borrow, the longer it may take to pay back your car loan, and the more interest you'll likely be charged.
- The length of your car loan term – The shorter the term of your car loan, the sooner your car will be fully paid off, and the less interest you’ll pay in total, even if your monthly repayments are higher. Lengthening your car loan term means making more repayments, each one for a smaller amount, which can help make your loan more affordable in the short term, though you’ll ultimately end up paying more interest in total by the end of the extended term.
- The interest rate you’d like to pay – While many of us would love a basic car loan with a low interest rate, these loans may also have more specific lending criteria, and thus may not be available to all borrowers. Some car loans with higher interest rates may offer more features and greater flexibility, which may provide greater value for money to the right borrower.
Using these figures, RateCity’s Car Loan Calculator will work out the following results:
- Monthly repayments – How much of your car loan’s principal and interest you’ll be paying back per month, not including fees, charges or other expenses
- Total repayment – The total amount of principal and interest you’ll have paid to your lender by the end of the loan term
- Total interest – How much of the previous total is made up of interest payments
By adjusting the figures in the calculator, you can see their effects on the results. This can help you get a better idea of which car loans can balance affordability in the short term with value for money in the longer term in a way that's suitable for your unique finances.
Once you’re satisfied with the calculator’s results, you can browse suggested car loans based on these results. While not all of these car loans will exactly match your entered details, you can still use RateCity’s car loans calculator as a benchmark to compare the affordability and value of other car loans.
What kind of car should I buy?
Before you take out a loan to finance your car purchase, you need to figure out what vehicle you want to purchase. And before you choose one of the thousands of makes and models on offer, you should consider whether you want a new or used car.
There are certainly benefits to buying a new car:
- Brand new, pristine cars are less likely to have mechanical issues or problems than used cars
- Many new cars come with a warranty, giving you greater peace of mind
- New cars often integrate the latest technology, including greater fuel efficiency
- You can enjoy more certainty buying a car from a regulated dealer than from a private seller
Used cars also have their positives:
- Pre-owned cars tend to be significantly more affordable
- They tend to depreciate more slowly than new cars
- A well-serviced and looked-after used vehicle can last just as long as a new car
- You have more room for negotiation
Ultimately, the type of car you buy will depend on your budget (RateCity’s car loan calculator can help you work our what’s affordable), and what you're looking for in a vehicle.
What types of car loans are there?
Not every car loan is created equal. Even if you’ve used our car loan calculator to estimate what repayments you can afford, it’s important to compare car loans before committing to a product.
- Fixed rate car loans have an interest rate that stays the same for the full loan term, keeping your repayments consistent and your budgeting simple.
- Variable rate car loans feature an interest rate that the lender may raise or lower from month to month. While this could shrink your car loan repayments if rates are cut, they could also grow if rates rise, complicating your budgeting.
Then, there are secured and unsecured car loans:
- Secured car loans use your new vehicle as collateral to guarantee the loan. If you default on your repayments, your new car could be repossessed to cover the lender’s losses. The bright side of this is that your lender may offer a lower interest rate on your loan, due to their reduced financial risk. Because you will still owe money if your car sells for less than it's worth, some lenders only offer secured car loans for the purchase of new cars, or for particular used car models under a certain age, to better guarantee their value.
- Unsecured car loans are basically the opposite of secured car loans. You aren’t required to provide security, so your lender can’t repossess your car, and the loans can be used to purchase a greater variety of vehicles. However, because there’s more risk for the lender, you may be charged a higher interest rate for an unsecured car loan.
What should I watch out for when comparing car loans?
Consider the benefits of any extra features attached to your car loan, as they could involve extra expenses that you may not necessarily need, and make your car loan less affordable. These extras could include insurance options, extended warranties or shortfall cover.
Watch out for fees. Establishment fees are used by numerous lenders, charging for the creation of your loan documentation. Ongoing fees may also be charged from month to month in addition to the interest, which can make your loan significantly more expensive in the long run.
To get a better idea of the true cost of different car loans, look at each loan’s comparison rate, which combines the advertised interest rate with the lender’s standard fees and charges. Remember though that some loans include nonstandard fees and charges that aren’t included in the comparison rate.
If you’d like to be able to pay off your car loan ahead of schedule and reduce the total interest you pay, check whether your lender charges fees for making extra repayments or for exiting the loan early, as these can make this option less affordable.
A car loan with a redraw facility can be helpful if you’re trying to pay your car loan off ahead of time, but are concerned about committing too much of your money to the loan. Once you’re ahead of your repayment schedule, a redraw facility can be used to withdraw money from your car loan’s surplus balance, which can be a handy option to have available in case of emergencies.
Whenever you’re buying a car, it’s important to organise a report from the Personal Property Securities Register (PPSR). Formerly known as a REVS check, this report will determine whether the vehicle is being sold with a financial encumbrance, AKA money still owing on it from a previous owner. You can organise one of these reports for yourself, though some lenders can manage this for you to save you some time and hassle, with some of these lenders charge a fee for the service.
Compare more Car Loans at RateCity
RateCity’s car loan calculator can help you work out what kind of car loan you can afford. RateCity also allows you to rate and compare a wide variety of different car loan options all in one place, so you can make a more well-informed financial decision.