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Car Loan Ratings

RateCity allows you to search through hundreds of car loans from Australian lenders. With so many car loan options to choose from, rating the available offers and working out which ones will most ideally suit your finances can sometimes be tricky. 

Car loans can be rated by their interest rates, fees and charges, features and benefits, and their flexibility. By rating car loans by each of these categories, and getting a better idea of their potential impact on your finances, you can make a more informed decision when selecting your car loan.

Car loan ratings by interest rate 

One of the simplest and most straightforward methods of rating different car loan offers is to compare their interest rates. The lower the interest rate, the less extra money you’ll need to pay back to the lender on top of your car loan’s principal.

Many car loans come with fixed interest rates, where you pay the same amount of interest with each repayment for the full term of the car loan. Fixed rate car loans can help to keep your repayments consistent and your budgeting simple. However, if you have a fixed interest rate, you won’t enjoy any savings if your lender cuts its interest rates.

Variable interest rates are also available for certain car loans. If you choose a variable rate car loan, your lender may raise or lower the interest it charges from month to month, based on the current economy. While this could lower your repayments if rates are cut, it could also mean paying more if rates rise, which can make preparing a budget more challenging.  

Rating secured and unsecured car loans

It’s worth considering whether you’d prefer a secured or unsecured car loan, as this can affect your interest rate.

Many car loans are secured loans, where the money you borrow is guaranteed against the value of the car you’re buying. This can help to reduce the lender’s risk, and therefore allow you to enjoy a more affordable interest rate. However, with some lenders, these loans may not be available for used cars over a certain age, where the vehicle’s value isn’t likely to be enough to guarantee the loan over the full term.

On the other hand, unsecured car loans don’t require the borrower to provide an asset as security, making them flexible enough to purchase a wider variety of vehicles. However, because of the greater risk they represent to lenders, unsecured car loans are more likely to have higher interest rates than their secured counterparts.

Rating car loans for new or used cars

When you’re rating the available car loans, it’s important to consider whether you’re planning to buy a new or used car.

While it’s no secret that new cars tend to be more expensive than used cars, new cars can often also offer significant value for money. New cars may integrate new technologies that can help to provide longer-lasting performance and retain the vehicle’s value for longer, which can be important when rating your choice of secured car loans.

Used cars tend to be more affordable than new cars, but that’s not their only appeal. Their value also tends to depreciate more slowly than new cars, allowing you to enjoy greater value from your car loan, and a well-maintained used car can also provide reliable performance. However, for used cars beyond a certain age, you may have trouble applying for a secured car loan with some lenders, who may not feel confident that these vehicles will retain sufficient value to guarantee the loan. In these cases, you may need to pay a higher interest rate for an unsecured car loan.

Rating car loans by fees and charges

Many lenders charge fees as well as interest on their car loans, which can make a big difference to your household budget. A car loan with a low interest rate and high fees and charges could ultimately turn out to be more expensive in total than a car loan with a higher interest rate and lower fees.

To work out the total cost of different car loan offers, you could add up each loan’s upfront and ongoing fees and combine them with the estimated interest payments, but it might be simpler just to look at each car loan’s Comparison Rate instead. The comparison rate expresses the approximate combined total of a car loan’s advertised interest rate and its standard fees and charges, allowing you to quickly and easily get a better idea of how much a car loan is likely to set you back.

It’s worth keeping in mind that Comparison Rates are best used as general guidelines only when you’re looking at car loans. Some lenders charge nonstandard fees for some of their car loan features, which can make these loans more expensive than what their Comparison Rate indicates. On the other hand, some lenders offer extra features with their car loans, which can provide additional value beyond what’s indicated by the comparison rate, depending on your financial situation.

Car loan ratings by lender

A wide variety of different lenders have car loans available, ranging from the big banks to non-bank lenders such as credit unions and building societies. There are benefits and drawbacks to borrowing with different types of lenders, which can affect how you rate different car loan choices.

Banks are popular lenders, capable of offering a variety of financial products along with their car loans. Plus, they can often offer a variety of ways to access information about your car loan, from phone and internet banking to dropping into your local branch. However, banks are more likely to have fixed lending criteria for their car loans, which can make it more difficult for some borrowers to successfully apply for a car loan from a bank.

Non-bank lenders are more likely to offer car loans with competitive interest rates and flexible lending terms, which can make them appealing to a wide variety of borrowers. However, these lenders may not be able to offer the same range of features and benefits with their car loans as those offered by certain banks. And if you take your car loan out from an online-only lender, you won’t have the option to visit a local branch or shopfront to discuss your car loan in person.

Car loan ratings by flexibility

Depending on your financial situation, you may rate car loans that offer greater repayment flexibility more highly than those with fixed repayment schedules. While keeping car loan repayments consistent can help you to manage your budgeting, having additional options available for paying off your car loan can also prove valuable in the right circumstances.  

Some lenders allow you to make extra repayments onto your car loan, on top of the scheduled repayments. The more of your car loan’s principal you pay off, the closer you’ll come to exiting the loan early, reducing the amount of total interest you’ll need to pay, and ultimately saving you money.  

If you do plan to plan to pay off your car loan ahead of its scheduled term, keep in mind that some lenders charge early exit fees to make up for the interest payments they’d be missing out on. Make sure that paying off your car early doesn’t accidentally cost you more than you expected!  

Another flexible option to keep an eye out for when rating different car loan offers is a Redraw Facility. If you make extra repayments onto your car loan, a redraw facility will allow you to withdraw any surplus balance in excess of your scheduled repayment total. This can come in handy in case of emergencies when you’ve already paid you’re available money onto your car loan – just use the redraw facility to withdraw what you need, subject to the lender’s terms and conditions.  

Checking your car’s history 

Regardless of the car loan you choose, it’s important to organise a Personal Property Securities Register (PPSR) report when purchasing a car. This report, formerly known as a REVS check, looks at the financial history of your vehicle and confirms whether or not it’s being sold with a financial encumbrance (money still owing on it from a previous owner). You can organise one of these reports for yourself, and some lenders can save you time and hassle by organising a report for you as part of your car loan, though some lenders charge a fee for this service.

Car loan ratings at RateCity

Depending on the type of car loan you’re looking for, you may rate different car loan deals more highly based on different criteria, ranging from car loans offering interest and comparison rates to help you save money, to car loans with flexible features and options for managing your finances.

Whatever your budget, RateCity puts a wide variety of a car loans from different lenders all in the one place, allowing you to rate and compare offers however you choose. By rating the available car loans by the most useful criteria, you’ll be able to narrow down your choice of car loan providers until you can make an informed decision about which lender you’ll choose when you buy your new or used car.

Frequently asked questions

How do you get a car loan?

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.

What is a car loan?

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.

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.

Should I service my own car?

There are also costs associated with vehicle ownership, such as paying for petrol and the obligatory ongoing maintenance. But should you cut down on costs by servicing your own vehicle?

If you’re considering getting out the tool box, spanner, and grease-laden towel, you need to carefully weigh up the risks and benefits. A trained mechanic will need to complete certain tasks, while you may be perfectly capable to handle other aspects yourself.

If you’re short on time, it may be worth paying for the convenience of a full vehicle service. However if you’re trying to slash your expenses, there are some basic maintenance tasks that you can complete yourself.

You should call a mechanic if you’re unsure about a vehicle maintenance task you’re about to take on. However there are a number of maintenance tasks that you may be able to complete with your own two hands including:

  • Replacing your car battery
  • Changing the oil
  • Replacing worn windscreen wipers
  • Replacing blown fuses

Remember to keep your car’s body in good condition, by washing and applying a protective wax on a regular basis, too.

Always check your car warranty agreement as some new car purchases come with an extended car warranty provided your services are conducted at the vehicle service centre where you purchased the car. In these circumstances, you may find the service fee is capped, alleviating some of the maintenance woes.

Can you refinance a car loan with the same lender?

You may be looking to refinance your car loan to get lower interest rates or reduce the total monthly amount you have to pay. Often, this leads to the question ‘can I refinance a car loan with the same bank?’

While it’s always worth shopping around for a better deal or at least to compare offers from other lenders, you can sometimes refinance to a different loan with the same lender. It may be simpler,  as the lender already has your details and knows your repayment history. 

Having said that, knowing the terms offered by other lenders may help you negotiate a better deal with your current lender.

What is vehicle finance?

Vehicle finance, also known as a car loan, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Vehicle finance can be used for both new and used vehicles.

What is a loan term?

The loan term is the amount of time the lender gives you to repay the car loan. For example, if you take out a $20,000 car loan with a five-year loan term, you would be expected to pay off the entire $20,000 (plus interest) within five years.

What is a dealership?

A dealership is a car yard or a place where cars are sold.

What is dealer finance?

Dealer finance is a car loan organised through a car dealer – as opposed to car loans organised by a finance broker or directly by the lender.

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.

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 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 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 guarantor on a car loan?

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.

What is a guarantor car loan?

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.

Can I get a discounted student car loan?

Being a student is tough enough, and while you might find the odd student discount on movies and technology, the same can’t be said about car loans, as you can’t really get a discounted student car loan.

Lenders make money on the interest and fees that they charge with loans, and the lowest interest and fees are given to the most reliable credit holders: people with excellent credit history.

As a student, you are unlikely to have enough on your credit report to warrant an excellent history. There are however, ways of getting a lower interest car loan if you can’t get an interest-free loan from the bank of mum and dad. One way of doing this may be through getting a guarantor car loan, which can get you a secured car loan by setting your parents up as guarantors.

Can I get a car loan with poor credit?

Poor credit doesn’t necessarily mean you won’t be able to get finance for your car purchase, though your options aren’t likely to be the same as someone with good credit.

In fact, a number of specialist lenders exist offering car finance for customers with poor credit, able to provide access to bad credit car loans.

However having a history of poor credit will likely mark you as a potential risk to lenders, so your car financing needs could see higher fees and interest rates. Alternatively, consider a secured car loan, which is a type of loan that uses the car you purchase as collateral, reducing the risk.

Other options include getting someone close to act as a guarantor for your car loan, or to talk to a broker about a personalised rate specific to your circumstances.

Can I get a no credit check car loan?

You may be able to get a no credit check car loan in certain circumstances, although it’s important to weigh up your options before doing so.

Most lenders refuse to provide no credit check car loans, because they don’t want to give loans to borrowers without first confirming that they have a track record of repaying debts. So any lenders that do provide no credit check car loans would take measures to protect themselves against the risk of default.

That’s why no credit check car loans have higher interest rates than other car loans. Also, borrowers often have to provide security and put down a larger deposit.

Can I buy a car as a student?

Buying a car is a huge financial decision, and shy of marriage and purchasing a house (or perhaps around the world travels), it may be the biggest financial decision you make. But if you’re looking at your empty pockets, don’t despair! Your dream of owning your own car could become a reality, if you look for and compare the right car loans for your circumstances.

How much is your car worth?

If you already own a car, you could potentially bring down the cost by selling your car in the process. Before that happens, though, you’ll need to find out how much your car is worth.

One of the first places to find this value is to research the value of your current car, giving you an idea of roughly how much it’s worth in its peak condition.

There are plenty of websites that offer a free online valuation, allowing you to enter your car’s make, model, year, badge and description, with results listing a price guide based on both selling your car privately and through a dealership.

Of course, dealerships will try to profit on your trade-in by buying it for less than they can sell it, making it highly unlikely that you’ll get the same price selling a car to a dealer as you would selling a car privately.

However, private car sales can be costly and can take months to sell, making car trading more convenient with a guaranteed return, even if you may not be able to realise the total value of your car’s worth.

Remember that everything is negotiable. If the dealership is offering you less for your trade than you wanted, try to negotiate elsewhere to gain that money back. Start by negotiating on the price of the trade and then ask them if they can give you a further discount on your new car.