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over
Product
Advertised Rate

From

3.25

% p.a

Fixed

Comparison Rate*

5.12

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Monthly repayment

$542

Loan amount

$5k to $750k

Total repayments
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4.20

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Advertised Rate

From

5.95

% p.a

Fixed

Comparison Rate*

5.95

% p.a

Company
Monthly repayment

$579

Loan amount

$5k to $50k

Total repayments
Real Time Rating™

3.59

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Advertised Rate

Headline rate From

6.99

% p.a

Fixed

Comparison Rate*

7.91

% p.a

Company
Monthly repayment

$594

Loan amount

$5k to $55k

Total repayments
Real Time Rating™

3.02

/ 5
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Advertised Rate

From

5.49

% p.a

Fixed

Comparison Rate*

5.49

% p.a

Company
Monthly repayment

$573

Loan amount

$2.1k to $30k

Total repayments
Real Time Rating™

3.91

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Learn more about car loans

What is a fixed rate car loan?

A car loan is a type of personal loan that is taken out by a borrower specifically to buy a new or used car or other eligible new or used vehicle. Fixed rate car loans lock the borrower into the same interest rate and repayments over the life of the loan term.

Fixed rate loans can help you avoid any financial stress should interest rates rise. As you’re locked into a set rate, the lender can’t make any unexpected changes to your repayments.

Is it better to have a variable or fixed rate car loan?

The best car loan for you will not be the best for someone else, as it depends on your financial situation.  If you’re looking for security, then you may prefer the certainty of a fixed rate car loan. To find the lender with the best car loan, whether variable or fixed, you need to compare the loan type, account fees and interest rates.

Benefits of a fixed rate car loan 

The main advantage of a fixed rate car loan is the certainty it offers and protection against future rate rises. Borrowers know exactly what their repayments will be, and that amount is locked in for the life of the loan. Set repayments provide a level of assurance that variable rate loans just can't.

Benefits of a variable rate car loan 

As the interest rate is variable, the lender can adjust it at any time. The main advantage of this is that your repayments may fall if your lender cuts their interest rates, reducing your interest costs. Variable car loans may also offer more flexible features, such as the ability to make extra repayments or pay out the loan early, features that are typically not available on fixed loans. 

Disadvantages of a fixed rate car loan 

While the benefit of a fixed rate car loan lies in its pre-agreed repayment structure, this is also a disadvantage. If your lender cuts interest rates, this will not be passed on to you if you have a fixed rate loan, only to borrowers on variable loans. In addition, interest rates on fixed loans may also be higher than rates on variable loans given the certainty they offer. Much like insurance, you need to pay a little extra to protect against rising interest rates. 

Fixed rate loans may also have more restrictive conditions than variable loans. For example, repaying your loan early may attract financial penalties, to ensure the lender recoups the loss of interest that an early exit brings.

Disadvantages of a variable rate car loan 

The main disadvantage of a variable rate loan is that the lender can raise the interest rate on your loan at any time. A sudden, unexpected increase in your repayments could exceed your budget, especially if you’re on a tight one.

How do interest rates work for car loans?

Interest rates are charged by lenders in return for the risk they take on when they lend money to individuals. The example below shows how interest rates can be calculated on a car loan with a 7 per cent interest rate and a monthly repayment of $400. 

The interest cost on car loans is usually calculated daily and accrued monthly.  As this is a principal and interest rate calculation, it does not include other fees or charges such as ongoing management fees, early exit fees, or late payment fees. These may apply to your car loan, so be sure to check this before signing anything. 

Month Starting Balance Interest Rate Daily Calculated Interest Monthly Interest Monthly Payment End of Month Balance
January $5000.00 7% 7% ÷ 365 = 0.02% 
0.02% x 5000 = $0.96 
$0.96 x 31 = $29.76  $400 $5000 + $29.76 - $400  
= $4629.76 
February $4629.76  7% 7% ÷ 365 = 0.02% 
0.02% x 4629.76= $0.89 
$0.89 x 28 = $24.86  $400 $4629.76 + $24.86 - $400 = $4254.62 
March $4254.62  7% 7% ÷ 365 = 0.02% 
0.02% x 4254.62= $0.86 
$0.86 x 31 =$25.29  $400 $4255.40 + $25.29 - $400 = $3880.69 

Note: Different banks will calculate interest rates over different times, so be sure to check with your preferred lender how they calculate them. 

 

Types of fixed rate car loans in Australia

Fixed rate car loans come in two main forms, secured and unsecured.

Secured fixed rate car loans 

Most car loans on the Australian market are secured by the vehicle purchased with the loan. This means that the car you buy is used as security against the loan, and your lender can repossess your vehicle if you do not make your repayments. The lender sees secured car loans as less risky compared to unsecured loans, as they can sell the car to recoup their losses if you default on your repayments. 

Some lenders will only offer secured loans for certain makes and models, or cars under a certain age, to further reduce their financial risk.

Unsecured fixed rate car loans

If the car you’re buying doesn’t qualify for a secured loan, or if you prefer not to risk losing your vehicle, some lenders offer unsecured car loans. Unsecured loans do not require collateral against the loan, such as the car. However, as they represent greater risk to lenders, unsecured loans typically have higher interest rates than those on secured loans. 

Unsecured fixed rate car loans usually have stricter eligibility criteria too, such as more stringent affordability tests and may only be offered to high income earners with a steady income stream.

What to look out for with fixed rate car loans

A fixed rate car loan with a low advertised rate may seem to be the best option. However, it’s important to look further than the interest rates to calculate the total cost of your fixed rate loan.

The car loan with the lower interest rate is not always the cheapest 

Even if a fixed rate car loan has a low interest rate, you’ll most likely still pay fees and charges in addition to interest costs. This could potentially make a low rate car loan ultimately more expensive than a higher-interest rate car loan with lower fees and charges. 

Let’s look at an example. Claire wanted to borrow $11,500. Lender A offers an 8% interest rate, with only a monthly fee of $5 and Lender B offers a 6% interest rate, but has multiple fees and charges throughout the loan term. Lender A actually works out $99 cheaper than Lender B, despite the 2% lower advertised interest rate. 

  LENDER A LENDER B
Loan Amount $11,500 $11,500
Loan Term 5 years 5 years
Advertised Interest Rate 8% 6%
Monthly Repayments $233 $222
Ongoing Fees $5/month = $300/total  $10/month = $600/total 
Other Fees $0 $450 
Total Amount to Pay $14,291  $14,390 

Source: RateCity Car Loan Calculator

 

Check the comparison rate 

From July 2003, the Australian government made it mandatory for lenders to display a comparison rate alongside an advertised interest rate. This comparison rate includes most fees and charges on a loan, and bundles this with the advertised rate to give an overall interest rate, called the comparison rate. Comparing different comparison rates is a helpful guide to borrowers as it gives a more accurate understanding of what the total cost of the loan might be.

However, it’s important to note that even a car loan with a low comparison rate may have additional non-standard fees that are not included in this rate. Using the comparison rate as a guideline to narrow down your choices is wise, but make sure to ask about all the fees and charges on a loan before signing on the dotted line.

Hidden fees and charges  

Fixed rate car loans offer a stable, simple repayment system. However, extra fees such as break costs may apply if you try to repay your car loan earlier than agreed. If you find yourself with extra funds available, and want to clear your debt with your lender, make sure you look at the fees associated with additional car loan repayments. Repaying early may attract financial penalties, to ensure the lender recoups the loss of interest that an early exit brings.

Variable rate car loans tend to have more flexible arrangements than fixed car loans. If you want to make extra repayments, you can often do these without charge. Loans that include the option to make extra repayments may also offer a redraw facility, so you can access any additional money you have paid on the loan if need be. A variable rate loan could be a more suitable option if you want flexibility and the opportunity to repay your loan early without financial penalties applying.  

Types of fees and charges that may be applicable include:

  • Application fees
  • Establishment fees
  • Extra repayment fees
  • Redraw fees
  • Early payout/Early repayment fees
  • Other ongoing or account keeping fees

High LVR on your car loan

A Loan to Value Ratio (LVR) is the percentage of money you borrow for a car loan, in comparison to the vehicle’s value. Some lenders have 100% loans available, where you borrow the full value of the car and don’t need a deposit. This may seem appealing, but often, a higher interest rate is charged by lenders on such a loan compared to one with a lower LVR to account for increased financial risk. 

Before you sign up to a fixed interest rate car loan, check the lender’s terms and conditions, their Product Disclosure Statement (PDS), lending criteria and loan fact sheets. Only with all the financial information can you make an informed decision on which loan will work best for you.

How long can a car loan last?

The length of time you have to pay off your car loan, known as the loan term, generally ranges from 1 year to 7 years. While you will typically have the option to choose the loan term that best fits your budget, it's important to keep in mind that the longer your loan term, the more you will likely pay in interest charges over the life of the loan. 

On the other hand, your regular fortnightly or monthly repayments will typically be more affordable on a longer loan term. Taking out a car loan on a 5 year term, for example, means the total loan amount will be spread over 5 years and repaid in regular instalments until the end of this period. In contrast, taking out a 2 year loan means you have a much shorter period of time to pay back that same loan amount, making the regular repayments higher.

When it comes to choosing between a shorter or longer loan term, the best option is the one that works for your individual needs. Consider using RateCity's Car Loan Calculator to get an estimate of how much your repayments might be on different loan terms.

How long can a fixed rate last?

Different to a fixed rate home loan, when you take out a fixed rate car loan the interest rate is fixed for the entire length of the loan term. A car loan term will in most cases be a much shorter loan term than a mortgage - which is commonly on a 25 to 30 year term - meaning it is more feasible for a lender to fix the interest rate for the duration of the term.

Put simply, if your fixed rate car loan is on a 3 year term, the interest rate will be fixed for the whole 3 years.

This can be beneficial, as interest rate rises won't be passed onto you at any point during your loan term, though neither will interest rate cuts.

Frequently asked questions

What is a fixed-rate loan?

A fixed-rate loan is one where the interest rate remains constant for an agreed amount of time. For example, if you take out a five-year fixed-rate loan at 8.75 per cent, the lender is obliged to leave your interest rate at 8.75 per cent for at least five years. By contrast, if you take out a variable-rate loan at 8.75 per cent, the lender can change the interest rate whenever it wants.

How to find a great car loan

Historically, finding a great car loan would require excess research ranging from visiting an excess of websites or making phone calls, but technology has moved on. Using RateCity, Australia’s leading financial comparison service, you can check out great deals from a range of lenders on the one site.

To start, select the amount you want to borrow and the length of the loan, narrowing your search to show just fixed or variable interest rate results.

Once you’ve indicated your search criteria, you’ll see an immediate list of lenders, ranked by interest rate or application fees. You’ll also be able to view the monthly repayment amount for each result, helping you to know what you can afford.

Up to six products can be compared side-by-side, complete with more information about each car loan, giving you more information about your options.

When comparing your car loan options, it’s ideal to keep in mind some points find a great car loan for your needs. Consider the following:

  • Choosing a low interest car loan can reduce costs
  • Selecting an option with low fees and charges is ideal, because these can really add up
  • Be aware of penalties, such as early exit penalties if you pay off the loan sooner than expected
  • Consider the features that best suit your situation

There are many ways to ensure that you get a great car loan. Ultimately, you’ll end up with the best deal by doing your research and selecting the most suitable product for you.

What is a variable-rate loan?

A variable-rate loan is one where the lender can change the interest rate whenever it wants. For example, if you sign up for a variable-rate loan at 8.75 per cent, the lender might change the interest rate to 8.90 per cent the month after and then 8.65 per cent the month after that. By contrast, if you take out a five-year fixed-rate loan at 8.75 per cent, the lender is obliged to leave your interest rate at 8.75 per cent for at least five years.

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.

What is an unsecured car loan?

An unsecured car loan is a loan that is not connected to a form of security, or collateral. Not all lenders provide unsecured car loans – and if they do, they generally charge higher interest rates for their unsecured car loans than their secured car loans.

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.

How to get a chattel mortgage?

Both businesses and individuals may use a chattel mortgage, provided that the car is being used predominantly for business purposes. 

To apply for a chattel mortgage, you need to first consider your options and choose a suitable lender that meets your requirements. Once you have selected a lender, you can apply for the loan online by filling out a form. If the lender doesn’t offer an online application process, you can either call them or visit their nearest branch. 

After you’ve applied, the lender will ask you to supply documents that confirm your identification, income, job profile, etc. If everything is in order, most lenders will arrange the loan’s settlement, so all you need to do is pick up your car!

Can you get a chattel mortgage with bad credit?

Getting approval for a chattel mortgage with bad credit may be possible, given ‘chattel’ (usually a piece of equipment or car) is put up as security for the loan. That means if you fail to repay the loan, the creditor can recover the loaned amount by repossessing and selling the car or piece of equipment. This differs from unsecured car loans, where the asset is not tied to the loan and cannot be taken if you don’t meet the repayments. 

What is proof of income?

Before giving you a car loan, lenders will ask for proof of income – documentary evidence that you earn as much as you claim you earn. Lenders will typically want some combination of tax returns, pay slips and bank statements. The reason lenders want proof of income is because they want to be sure you have the means to repay the car loan.

What is CTP insurance?

CTP insurance, also known as compulsory third-party insurance or a green slip, is compulsory if you want to register a vehicle in Australia. If you’re responsible for a car accident, your CTP insurance will be used to pay any compensation due to anyone who might be injured or killed. However, CTP insurance doesn’t cover you for vehicle damage or theft.

What is a balloon payment?

Some lenders will offer borrowers reduced monthly repayments in return for a one-off lump sum – or balloon payment – that the borrower has to pay at the end of the loan. Generally, the total repayments on a loan with a balloon structure will be higher than a loan without.

What is trade-in value?

The trade-in value is the price you could realistically charge if you were to sell your car to a dealer while buying a replacement vehicle. Generally, a car’s trade-in value is less than its market value. That’s because the dealer has no interest in buying your car unless it can make a profit – which can only be done if the dealer has room to increase the price.

What is an upfront fee?

An upfront fee is a one-off fee that many lenders charge when you take out a car loan.

What is a redraw facility?

A redraw facility allows you to re-borrow any funds you may have repaid ahead of schedule – although conditions and fees often apply. Not all car loans come with a redraw facility.

What is a commercial hire purchase?

A commercial hire purchase, or CHP, is an arrangement by which a finance company buys a car on your behalf. You get to borrow the car in return for making regular payments to the financier. Once the final payment is made, you take ownership of the car. 

What is collateral?

Collateral, or security, is an asset you agree to surrender to a lender if you fail to repay a loan. Generally, the collateral for a car loan is the car itself. So if you fail to repay the loan, the lender might seize your car, sell it and then use the proceeds to recover their debt.

What is a refinance?

A refinance is when you swap one car loan with another. For example, you might take out a car loan with Lender X because it is the best on the market at the time – but two years later, you might switch to Lender Y because you discover that it now has the best loan. Conditions and fees often apply when you refinance.

What is a loan-to-value ratio?

The loan-to-value ratio, or LVR, is a percentage that expresses the amount of money owed on the car compared to the value of the car. For example, if you take out a $15,000 loan to buy a $20,000 car, you have a loan-to-value ratio of 75 per cent. Loan-to-value ratios change over time as you pay off your loan and your car depreciates in value. For example, two years later you might now owe $10,000 on your car, which might now be worth $15,000. In that case, although there would still be a $5,000 difference between the size of the outstanding loan and the value of the car, the loan-to-value ratio would now be 67 per cent.

What is a pre-approval?

A pre-approval is a formal document that indicates how much a lender is willing to lend to a consumer – once that person has found the car they want to buy. A lender will assess a borrower’s credit history and financial circumstances before issuing a pre-approval. However, lenders are under no obligation to follow through on pre-approvals, so pre-approvals should be seen as statements of intent rather than rock-solid guarantees.

What is a novated lease?

A novated lease is a car lease that is ‘novated’, or transferred from one party to another. Novated leases are often used when companies provide a car as part of a salary package. The employer signs for the lease and makes the lease payments, but the employee assumes the responsibility of looking after the car. While most car leases involve two parties, novated leases involve three – employer, employee and financier.