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Why taking out a car loan through your regular bank might be a bad idea

Why taking out a car loan through your regular bank might be a bad idea

A range of online lenders, credit unions and challenger banks are offering lower car loan interest rates than the big four banks.

Latitude Financial, for example, provides secured fixed-rate car loans starting from 6.99 per cent (comparison rate 8.10 per cent).

That is significantly lower than the car loan interest rates from the big four banks, which range from 8.49 per cent to 12.69 per cent.

The moral to the story is to shop around and compare car loans, rather than automatically borrow through the lender where you normally do your banking.

It’s entirely possible another institution might have a car loan that is very similar to – and yet significantly cheaper than – a car loan being offered by your bank. Over the life of the loan, you might save hundreds or even thousands of dollars by choosing the lower-rate option.

That said, the cheapest car loan won’t always be the best car loan for your situation. You should also weigh up fees, loan features and repayment options when researching car loans.

Secured fixed-rate car loans – big four banks

LenderAdvertised rateComparison rate
Commonwealth Bank8.49%9.54%
Westpac8.49%9.67%
ANZ12.45%13.32%
NAB12.69%13.56%

Secured fixed-rate car loans – competing lenders

LenderAdvertised rateComparison rate
Latitude Financial6.99%8.10%
Bank of Queensland7.39%8.19%
Coastline Credit Union7.54%7.82%
Bendigo Bank7.79%8.64%

Data accurate as at 29th August 2019. Planning to get a car loan? You can use RateCity’s car loan calculator to research borrowing costs. 

Thinking about refinancing to a better car loan? You can use RateCity’s car loan switch and save calculator to compare your current car loan with other options.

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This article was reviewed by Business & Finance Writer Rachel Wastell before it was published as part of RateCity's Fact Check process.

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