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People receiving a pension may wonder if they are eligible to apply for and be offered a car loan. If you're in this position, there is no reason not to explore your options, and many lenders will assess your financial circumstances to examine your eligibility. Car loans for pensioners are personal loans, and when assessing your situation, lenders will look at all your financial details, including your credit history, the value of your assets (including your home, if you own one) and what type of pension you receive. Pensioners with assets can be quite an attractive prospect for a lender, as a car loan could be secured on a home.
Can I get a car loan on a pension?
Yes. If you are receiving an aged or disability pension/DSP, Centrelink payments, parenting payment single/PPS, partnered parenting payments/PPP, or carer’s pension, there may still be options available to you when it comes to getting a car loan. Here at RateCity we try our best to outline the information that could help you make the best financial decisions possible, and potentially get you closer to an affordable car loan, even if you have bad credit.
Can I get a car loan if I’m retired?
Yes. Your options will be more limited than those of someone who is in employment, but as long as you have a form of income from aged pension, carer’s income, disability payments or Centrelink payments, it is possible to get a car loan.
Things to consider before looking for a car loan if you are on a pension
Are you a homeowner?
You are more likely to be accepted for a car loan if you have property that can secure the loan and reduce the risk to the lender.
How much do you need to borrow?
Lenders are more likely to lend to you in the case of smaller amounts.
Assess whether you have any savings that you can put towards your purchase.
Borrowing less will mean less to repay, and therefore less cost to you in interest payments.
How much is your income?
Even if you are not in employment, your pension payments will still be looked at by a lender as income.
Lenders will take your income into account in order to assess whether you can meet the repayments of a car loan.
This will affect the interest rate that you are offered.
How much are your outgoings?
Look at your income against your outgoings and be honest with yourself about how much you can afford to repay.
Assess your budget capabilities yourself prior to making any applications to check that repaying a loan is feasible.
You may need a car for daily use and find that owning a car is cheaper than living without one.
You might find on assessment that owning a car isn’t in fact necessary to your lifestyle.
How do car loans for pensioners work?
A personal loan works the same way for pensioners as for anyone else, in that you borrow an amount of money to pay for your car, and then repay that amount with interest over a number of months or years. One to five years is usual, but you could get up to seven years depending on the lender and the amount you want to borrow. Putting down a deposit or trading in an older car will reduce the principal sum you’ll be loaned, and consequently reduce the repayments. Interest rates will vary, so you should make comparisons between lenders – a loan comparison calculator is a handy online tool.
Yes. If Centrelink payments are your main source of income, getting a loan for a car can seem like an uphill struggle. However, there are still lenders who could be happy to lend to you. While the big four banks might not be willing to provide you with a loan if you are not in employment, smaller lenders and credit unions, as well as specialist lenders, tend to be more accommodating.
If you are on Centrelink payments, try to check the minimum income eligibility on the loan that you are looking to apply for. Applying for loans and being rejected will negatively impact your credit score, so be sure that you meet the requirements set out by the lender.
It may be advisable to try getting in touch with the lender directly before putting in an application.
You may even be able to receive a short-term advance on your Centrelink payments, providing that the amount you need to borrow for the car is low. This will be assessed on a case-by-case basis.
Can I get a pensioner car loan with bad credit?
Yes. While having bad credit and being on a pension limits your options, there are lenders who potentially will lend to you. There are also many lenders who specialise in bad credit car finance. Having bad credit means that applying for any loan is more difficult to do, and it tends to mean that the interest rates you will face will be higher.
Things to compare when applying for bad credit finance include:
Secured and unsecured loans – car loans tend to be secured against the vehicle, but if you are purchasing a used car you might require an unsecured car loan, or to secure the loan against your property. Secured loans tend to have lower interest rates than unsecured loans, but is it worth risking your home or your car if you don’t meet the repayments?
Interest rates – look at what interest rates are available to you with your current credit score. Do the repayments fit in with your current budget? With RateCity you can calculate repayments easily with our car loan calculator.
Fees – look at the fees that are attached to car loans. Are there any upfront or ongoing fees? Some loans may offer a lower interest rate but with fees that could end up making the loan more expensive. Also keep an eye out for early exit penalty fees. You don’t want to be caught out should you decide to pay off the loan early.
Final thoughts on car loans for pensioners
It is important to really weigh up your options and compare car loans in order to find the best possible outcome for your circumstances. Be realistic about what you can afford when looking at car finance and assess how necessary a car purchase really is for you.
Find loans that you are more likely to qualify for
For some people though, a car really is a necessity. If you have bad credit and are struggling financially there are other options. You can look into Microfinance from Good Shepherd Finance. Partnered with NAB they provide StepUP loans of between $800 to $3000 for people on low incomes for various expenses, including cars. You may find that this sort of loan is the most affordable for your circumstances.
You can also contact the free National Debt Helpline, on 1800 007 007 for further advice.
Can I get a car loan if I am on disability benefit?
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.
A guarantor on a car loan is a third party, usually a relative or friend, who guarantees to meet the repayments of a loan for the purchase of a car, if the borrower/owner of the car defaults on the loan.
Guarantor car loans can be useful for people who would otherwise struggle in being accepted for credit to purchase a vehicle. These may include people with bad credit, students and young people who may have no credit history, as well as some pensioners.
Many lenders offer guarantor car loans, guarantor personal loans and guarantor home loans, because of the significantly reduced risk to the lender.
Lenders that provide bad credit car loans tend to be smaller challenger lenders rather than the bigger banks.
Bad credit car loans are a niche product. The bigger banks tend to focus on mainstream car loan finance for borrowers with better credit histories. That’s why smaller lenders tend to be the ones that provide bad credit car loans.
Bad credit car loans can have high interest rates and fees, so it’s important to compare options before submitting an application.
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.
A bad credit car loan is a car loan for borrowers who have ‘bad credit’ or a bad credit history.
Some lenders refuse to offer bad credit car loans, because they believe there is an excessive risk that bad credit borrowers will not repay their loans. However, other lenders are willing to provide bad credit car loans.
Generally, these lenders charge higher interest rates for bad credit car loans than ‘prime’ car loans, reflecting the higher level of risk. Bad credit car loans may also have higher fees than prime car loans.
However, the big advantage of a bad credit car loan is that it allows borrowers with bad credit to access finance. Another advantage is that it could help bad credit borrowers improve their credit rating, assuming they make all their repayments on time.
Yes, as long as you meet basic criteria set out by lenders you are eligible for car finance. Your interest rate will be determined based on your financial history which can be found in your credit report, your income and any property you may own.
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.
Yes, you can get a car loan with bad credit, although you’ll probably find the process trickier and dearer than that experienced by people who have good credit histories.
You can find a number of lenders that specialise in bad credit car loans. However, make sure you compare bad credit car loans before you sign on the dotted line, because not all car loans are alike and having bad credit may mean you are more likely to be hit with higher fees and interest rates.
If you have bad credit, it’s important not to take out a car loan unless you can afford the repayments because a default could further damage your credit rating. Conversely, if you make all the repayments and repay the loan successfully, your credit rating might improve.