Small lenders offering low-rate car loans

Nick BendelJun 16, 2018( 2 min read )

Australians who are in the market for a new car can take out a car loan for under 5 per cent, an analysis of the car loan market has found.

There are several lenders with car loans under 5 per cent, including 360 Finance, where car loans start from 4.85 per cent (comparison rate 5.72 per cent).

Another non-bank lender, PrimeEdge, is offering car loans from 4.99 per cent (comparison rate 6.04 per cent).

Here are some of the cheapest car loans in Australia:

Lender	Product	Advertised rate	Comparison rate
360 Finance	Personal Car Loan	4.85%	5.72%
PrimeEdge	New Car Loan	4.99%	6.04%
Bank First	Green Car Loan	5.29%	5.50%
Community First Credit Union	New Car Loan	5.34%	6.10%
Move Bank	New Car Loan	5.39%	5.66%
Loans.com.au	Car Loan	5.44%	5.99%
Holiday Coast Credit Union	New Car Loan	5.49%	5.49%
People’s Choice Credit Union	Discounted Personal Loan (Car Loan)	5.64%	5.99%
Beyond Bank	Low Rate Special Car Loan	5.69%	5.97%
Defence Bank	New Car Loan	5.69%	6.55%

How much does a car loan cost?

If you take out a $20,000 car loan with a five-year loan term, here is how much you’d have to repay based on different interest rate scenarios:

Interest rate	Monthly repayments	Total repayments
5.00%	$377	$22,645
6.00%	$387	$23,199
7.00%	$396	$23,761
8.00%	$406	$24,332
9.00%	$415	$24,910

Please note that the cheapest car loan isn’t necessarily the best car loan for every borrower.

Advertisement

Share this article

Advertisement

Related Articles

View All >

Similar car loans searches

secured car loan fixed commonwealth bank car loans

payments smart personal loan variable northern inland credit union car loans

car loan pepper car loans

me bank car loans

community first cu car loans

Today's Top Car Loans Products

Green Car Loan Fixed (Special)

Advertised Rate

Comparison Rate

5.29%

Fixed

5.50%

Features a low rate
No ongoing fees
No early exit penalty
Can apply online

Car Loan

Advertised Rate

Comparison Rate

5.50%

Fixed

5.85%

Features a low rate
No ongoing fees
Can apply online
Suitable for both new or used car

Car Loan

Advertised Rate

Comparison Rate

4.79%

Fixed

5.34%

Features a low rate
Can apply online
Can apply in branch
Suitable for both new or used car

Secured Car Loan

Advertised Rate

Comparison Rate

5.49%

Fixed

6.09%

Features a low rate
Can apply online
Can apply in branch
Suitable for both new or used car

FAQs

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.

Yes, there are some lenders who will consider your application if you are on a disability pension. As long as you have an income, usually of over $400 a week, there are lenders that are willing to supply you with a loan. There are also microfinancing charitable organisations that provide low interest loans for people on low incomes for certain necessary amenities, such as cars, if they match the specified criteria.

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.

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.

There’s no set number. That’s because borrowing capacity differs from person to person, as well as lender to lender.

Lenders don’t give out car loans unless they’re confident they’ll be repaid. Each person is different, so the amount of money one person can successfully borrow will differ from another person’s number. Also, each lender uses its own formulas to calculate borrowing capacity – so Mr & Mrs Smith might find that while Lender X will give them a car loan for $20,000, Lender Y will offer only $18,000.

The interest rate is the price you have to pay for borrowing money. The interest rate is expressed as an annual percentage of however much of the loan remains to be paid. For example, if you took out a $10,000 car loan with an interest rate of 8.75 per cent, you would be charged 8.75 per cent of $10,000, or $875 of interest per year. But if you then reduced the outstanding loan to $9,000, your annual interest bill would be 8.75 per cent of $9,000, or $787.50.

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.

The comparison rate is known as the ‘real’ interest rate you have to pay – unlike the advertised interest rate, which is often an artificially low number. That’s because the comparison rate includes both the advertised rate and the associated fees. According to the industry standard, comparison rate calculations are made on the assumption that the car loan will be for $30,000 over five years.

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.

Repayments are the regular payments you make to pay off your car loan. Repayments generally occur on a monthly basis, although many lenders will also give you the option of making fortnightly or weekly loan repayments.

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.

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.

Comprehensive insurance protects you in the event you’re responsible for a car accident. Policies vary from provider to provider, but comprehensive insurance generally covers you for damage to your car and property, as well as the other parties’ cars and property. A comprehensive insurance policy may also protect you from theft, vandalism and natural disasters.

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.

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.

Borrowing capacity is the amount of money that a consumer is able to borrow from a lender. Each consumer’s circumstances are unique, so different people will have different borrowing capacities. Lenders use their own in-house formulas to calculate borrowing capacity, so the same consumer might have different borrowing capacities at different lenders.

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.

Some lenders will charge you an establishment fee, or one-off upfront fee, to cover the cost of setting up your car 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.

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