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Learn more about car loans

How do Sydney car loans work?

Sydneysiders looking for car finance have plenty of choice when it comes to their options for motor vehicle loans. In this major city, there are deals offered by established Australian lenders as well as newer, online-only financiers. All of this is advantageous if you’re looking for a good value loan to purchase your first, or next, car.

With a competitive marketplace throughout Australia, borrowers can be assured that interest rates on loans are competitive, making it easier to find a deal that's right for you.

What are the main features of car loans in Sydney?

Loans differ according to the criteria you are seeking and the facilities offered by the lender. These focus on the loan amount you want to borrow, the type of interest rate, your credit status and any extra features you may require.

To ensure your comparison is comprehensive, it's worth considering the following factors:

Interest rate - If you plan to buy a new car, you may benefit from lower interest rates than if you were to buy a used vehicle. Finding a competitive interest rate is an important part of any car loan comparison, but remember to factor in any fees and features in order to understand the true cost of the loan. 

Comparison rate - When choosing your loan provider, you should always check the comparison rate displayed alongside the advertised rate. Any extra fees or charges are included in the comparison rate so you will be able to get a clear picture of the differences between lenders.

Fixed rate vs variable rate - A fixed interest rate can provide certainty, while a variable rate can fluctuate with the market.

Secured vs unsecured loan - Often, secured car loans are cheaper than unsecured ones, because if your loan is secured to your new car and you default on your repayments, the bank has the right to sell the car to recoup outstanding costs. Keep in mind, however, that if you're buying a car that is over a certain number of years old, you may not be eligible for a secured car loan and may need to opt for an unsecured car loan instead.

Loan term - A longer loan term will generally mean lower repayments but more interest payable over the life of the loan. A shorter loan term will likely save you money on interest charges but your repayments will be higher. Choose a loan term that works with your budget.

Fees - Some of the fees you may be charged include application fees, establishment fees, extra repayment fees, early repayment fees and other monthly fees.

Features - There might be certain loan feature that are important to you, such as unlimited extra repayments, a redraw facility, or a balloon payment option. If this is the case, be sure to confirm whether your preferred loan product offers these features.

What are the pros and cons of car finance?
  • Whether you're buying a new or used car, finding a good deal on your car finance personal loan could help you get the vehicle you want promptly, and at a fair price.
  • Choosing the most suitable car loan for you will allow you to have control over when you make repayments, what features are available and how long it takes you to pay it off.
  • Car loans often have restrictions on the type of car you can buy, such as how old it is and what kind of vehicle it is.
  • If you take on too big of a commitment and find you can't manage repayments, you could default on your loan and damage your credit score.

How can I find Sydney car finance at RateCity?

To help you find the best car loan options for your individual needs, RateCity has a number of helpful tools to save you the hassle of shopping around.

Here are some of the actions you can take find car finance at RateCity today:

Before you begin the loan application process for your new car loan, check the lending criteria to see whether you meet the eligibility requirements for the loan product you're interested in.

Consider reaching out to your preferred lender directly to enquire about any questions you may have. Ensure you read the product disclosure statement (PDS) and any disclaimers before you apply.

For information specific to your personal financial situation, consider speaking to a financial adviser or car loan broker.

Frequently asked questions

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.

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.

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 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.

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 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.

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.

What are the pros and cons of guarantor car loans?

Like all things, there are positives and negatives to guarantor car loans, though one may outweigh the other depending on your needs.

Guarantor car loan pros may include that you’re more likely to be approved for a long if you have no credit or a history with bad credit, that you’re more likely to secure a car loan with a lower interest rate, and that because your guarantor car loan is based on a relationship, you will be more inclined to meet your repayment schedule.

However, there are negatives, as well. Guarantor car loan cons may include leaving a detrimental mark on a personal relationship with added strain if you don’t meet your repayments, and you may take out a loan that you can’t actually afford.

Weighing these pros and cons will give you a greater understanding of whether a guarantor loan is ideal for your circumstances.

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 are loan repayments?

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

Can I get a car loan with bad credit?

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.

Does having a guarantor on a car loan lower your interest rate?

While it’s not necessarily a guarantee, having a guarantor on your car loan will improve your chances of having your application accepted, and may mean that you are able to attain a lower interest rate loan.

Having a guarantor with excellent credit history and/or is a property owner reduces the risk to the lender because the payments are guaranteed by someone who is considered to be financially secure and reliable.

As such, even if your credit history isn’t perfect, a guarantor may be able to help you secure a lower rate from some lenders.

What is the role of a guarantor on a car loan?

The role of a guarantor on a car loan is to meet repayments if the borrower of the loan were to default for any reason, such as not being able to afford it.

Useful for loan applicants with poor or bad credit, a guarantor makes it possible for these loans to be made secure, because there’s less risk for a lender overall.

Companies will likely give fair warning before they charge a guarantor for the costs of the loan, or before they repossess anything of the guarantor’s that may have been used as security. Still, it is important for a car loan guarantor to fully understand their responsibilities before they commit to the transaction.

I’ve been denied a car loan before; can I still get car finance?

Even if you’ve been denied a car loan before, you might still be able to get car finance. The key is to make the right application to the right lender.

The ‘right’ application is one that makes you look like an acceptable risk, which might include things like improving your credit score, increasing your savings rate and accumulating a bigger deposit.

The ‘right’ lender is one that deals with borrowers like you. For example, while some car loan lenders only deal with good credit borrowers, there are others that specialise in bad credit or poor credit borrowers.

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 a dealership?

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

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 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.