Are you looking to upgrade your car, or purchase that vintage classic you’ve had your eye on? If you don’t have enough money saved to purchase your dream second hand vehicle, a used car loan could be a competitive option for you.  
 
Whether you’re in the market for a hatchback, campervan or even a Ford Mustang, a used car loan can help you get behind the wheel, without the hefty price tag. 

Find and compare used car loans

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From

3.60%

Variable

4.51%

Australian Military Bank

$547

$4k to $80k

4.24

/ 5
More details

From

4.40%

Variable

4.88%

ebroker.com.au

$558

$5k to $150k

3.87

/ 5
More details

From

3.85%

Variable

4.94%

Finance Ezi

$550

$10k to $250k

3.73

/ 5
More details

4.80%

Variable

4.94%

First Choice Credit Union

$563

From $30k

3.79

/ 5
More details

4.69%

Fixed

4.96%

Police Credit Union

$562

From $20k

3.93

/ 5
More details

4.74%

Variable

5.01%

Transport Mutual Credit Union

$563

From $5k

3.74

/ 5
More details

4.89%

Fixed

5.16%

Beyond Bank Australia

$565

$25k to $125k

3.73

/ 5
More details

4.99%

Variable

5.20%

Central West Credit Union

$566

From $30k

3.60

/ 5
More details

4.67%

Fixed

5.22%

loans.com.au

$562

$5k to $100k

3.71

/ 5
More details

5.45%

Fixed

5.45%

Bank Australia

$572

From $1k

3.40

/ 5
More details

5.45%

Variable

5.80%

Hunter United

$572

$10k to $100k

3.08

/ 5
More details

From

5.29%

Fixed

5.84%

Plenti

$570

$10k to $100k

3.35

/ 5
More details

From

5.29%

Fixed

5.84%

Plenti

$570

$10k to $100k

3.50

/ 5
More details

5.80%

Variable

5.84%

Laboratories Credit Union

$577

$1k to $50k

3.41

/ 5
More details

From

5.50%

Fixed

5.85%

OurMoneyMarket

$573

$2k to $75k

3.26

/ 5
More details

5.49%

Variable

5.87%

Nova Alliance Bank

$573

From $5k

3.60

/ 5
More details

5.64%

Fixed

5.92%

Illawarra Credit Union

$575

$10k to $50k

3.37

/ 5
More details

5.65%

Variable

6.00%

BCU

$575

$5k to $65k

3.25

/ 5
More details

5.49%

Fixed

6.15%

RACQ Bank

$573

$3k to $60k

3.24

/ 5
More details

5.99%

Variable

6.20%

Gateway Bank

$580

$3k to $75k

3.24

/ 5
More details

From

4.99%

Fixed

6.23%

360 Finance

$566

$5k to $10m

3.63

/ 5
More details

5.67%

Fixed

6.23%

loans.com.au

$575

$5k to $100k

3.25

/ 5
More details

5.99%

Fixed

6.25%

G&C Mutual Bank

$580

$0 to $150k

3.26

/ 5
More details

From

5.95%

Variable

6.30%

The Capricornian

$579

$5k to $75k

3.23

/ 5
More details

6.35%

Variable

6.38%

Lysaght Credit Union

$585

From $5k

3.03

/ 5
More details

6.19%

Variable

6.40%

Qudos Bank

$583

$10k to $75k

3.05

/ 5
More details

6.19%

Variable

6.40%

Qudos Bank

$583

$10k to $150k

3.05

/ 5
More details

From

5.40%

Fixed

6.45%

CarLoans.com.au

$572

$7.5k to $100k

2.96

/ 5
More details

5.69%

Variable

6.48%

Defence Bank

$576

$1k to $150k

3.08

/ 5
More details

5.99%

Fixed

6.63%

Heritage Bank

$580

$5k to $100k

3.07

/ 5
More details

6.45%

Fixed

6.66%

Bank Australia

$586

From $1k

2.99

/ 5
More details

5.99%

Variable

6.67%

Bankstown City Unity Bank

$580

$10k to $10m

3.10

/ 5
More details

From

5.99%

Fixed

6.69%

RACV

$580

From $5k

2.97

/ 5
More details

6.74%

Variable

6.74%

MyLife MyFinance

$590

$10k to $100k

2.87

/ 5
More details

From

5.49%

Fixed

6.75%

360 Finance

$573

$10k to $50k

2.88

/ 5
More details

6.49%

Variable

6.87%

Regional Australia Bank

$587

From $10k

3.02

/ 5
More details

6.49%

Fixed

6.88%

Beyond Bank Australia

$587

$5k to $125k

2.90

/ 5
More details

6.64%

Variable

6.92%

Coastline Credit Union

$589

$10k to $100k

2.97

/ 5
More details

6.95%

Fixed

7.09%

Firefighters Mutual Bank

$593

$2k to $80k

2.72

/ 5
More details

6.95%

Fixed

7.09%

Teachers Mutual Bank

$593

$2k to $80k

2.72

/ 5
More details

6.79%

Fixed

7.16%

CUA

$591

$5k to $100k

2.89

/ 5
More details

6.49%

Fixed

7.19%

NRMA Car Loans

$587

From $15k

2.77

/ 5
More details

6.99%

Variable

7.20%

Horizon Bank

$594

$5k to $50k

2.90

/ 5
More details

6.95%

Variable

7.22%

Geelong Bank

$593

$5k to $80k

2.92

/ 5
More details

Learn more about car loans

What is a used car loan?

Used car loans are personal loans used to finance the purchase of a second-hand vehicle.

How do used car loans work? 

Similar to new car loans and personal loans, used car loans involve borrowing a set amount of money, and paying it back with interest over an agreed period of time, known as the loan term.The loan is used to buy a used car, rather than a new car.  

What is considered a ‘used’ car? 

A used car is technically defined as any car that has been previously registered in Australia. Buying a used car allows you to keep costs down and to avoid the depreciation associated with buying a new car. That’s because you can lose thousands of dollars in market value the moment you drive a car out of the dealership. 

What are the different types of used car loans? 

Used car loans can be secured or unsecured, and have either fixed or variable interest rates. The sort of car purchase they fund can vary. Some lenders only offer loans on used cars up to a certain age, often up to five years, as they consider older cars too risky to finance.  Others may consider offering loans on older cars if they hold their value.

Secured used car loans 

A secured car loan is a personal loan that is guaranteed against the value of an asset, usually the car itself. If you can’t pay it off, the lender may seize the asset and sell it to cover their losses. Secured loans are less risky than unsecured loans, so interest rates are typically lower.

Can I get a secured loan using my car as collateral? 

Some lenders will not offer secured loans for used cars, or only offer loans for particular vehicle models or those under a certain age. You will need to check with the lender whether you can get a car loan for the second-hand car you’re considering buying. If the car doesn’t qualify as security, you might still be able to secure your car loan with some other asset, such as property, or you could opt for an unsecured car loan instead.

Unsecured used car loans

Unsecured loans do not require collateral. This means if you default on your repayments, the lender can’t repossess your vehicle, or any asset you may have used as collateral on a secured loan. These types of used car loans often have much higher interest rates than secured loans, since they are higher risk to the lender. 

Variable vs fixed interest rates 

Now you know the difference between secured and unsecured used car loans, it’s time for you to think about whether fixed and variable interest rates will work best for you.

Variable interest rate loans 

The interest rate on a variable loan may rise or fall over the term of the loan. These interest rate changes can be influenced by the cash rate set by the Reserve Bank of Australia (RBA) and the lender’s own funding costs. If you decide to take out a variable used car loan, you should budget for higher repayments just in case your lender raises the interest rate during the loan’s term.

Fixed interest rate loans 

Fixed rate car loans lock the borrower into the same interest rate and repayments over the life of the loan term. Fixed rate loans can help you avoid any financial stress should interest rates rise. As you’re locked into a set rate, the lender can’t make any unexpected changes to your repayments. However, if your lender reduces their interest rates, you won’t enjoy any savingsavailable with variable interest rate loans.  

The interest rate on fixed loans may be higher than rates on variable loans given the certainty they offer. Much like insurance, you need to pay a little extra to protect against the risk of rising interest rates. Another potential negative of fixing is that you may lose flexibility around how you repay your used car loan. Extra fees such as break costs may apply if you try to repay your car loan earlier than agreed or financial penalties may apply if you make extra repayments. 

Is it better to buy a used car? 

New and used cards have both pros and cons, and the choice of which car is better depends on a variety of factors, including your financial situation and what you want.  

New vs used car loans 

The main difference between new and used car loans is the financial risk associated with financing the purchase of a second hand vehicle. 

When comparing new and used car loans, you need to consider: 

Interest rates: In most cases, you are more likely to pay a higher interest rate for a used car loan than you would for a new car loan. This is because most car loan lenders consider used cars a greater financial risk, as they have more wear and tear. Used cars are less likely to last for the lifetime of the loan, which is why lenders charge extra interest to protect themselves from potential loss. 

Depreciation: New cars can be impacted significantly by what is known as depreciation. Most new cars reduce in value by around 30 per cent in the first two years after purchase, and can lose thousands of dollars in value as soon as they leave the dealership. With a used car, the previous owner has already absorbed the depreciation, and therefore you can save money on the purchase price and therefore, on the total loan amount. 

Loan amount: Used cars often cost less to buy than new cars, so you probably won’t need to borrow as much money than if you buy a new one. A lower loan amount can will mean more affordable repayments and you pay less in interest costs over the lifetime of the loan compared to buying a new car. 

Which bank is best for a used car loan? 

Australian car loan lenders have different criteria to help them determine whether a car counts as new or used, and to estimate the level of risk involved. For example, some lenders count any car less than two years old as new, while some lenders count all cars over five years old as used.

Comparing used car loans

As with any large purchase, it’s crucial to shop around and compare car loans. The most important thing is to first work out how much you want to borrow and the duration of  your loan. Then you can compare used car loans in regards to interest rates and security. 

Once you have this information, you can start to estimate your car loan repayments and get anidea of what you can afford. You will pay interest on the amount you borrow, along with various fees and charges, which you will need to investigate. 

Creating a car loan budget 

When you create your car loan budget, you need to consider: 

  • Cost of the car 
  • Car insurance fees 
  • Registration fees / stamp duty tax 
  • Repairs and maintenance 
  • Fuel & road tolls 
  • Membership to roadside assistance organisations 
  • Monthly car loan repayments 
  • The loan term 
  • Car loan fees & interest

In other words, buyers and borrowers must consider the full costs of owning the car including the financial liabilities, before determining whether they can afford it.  

Things to look out for when getting a used car loan 

Getting a used car loan can be a complex and timely process, but it’s important to get all the facts before signing anything. If you’re unfamiliar with the loan approval process, there are a few things you need to be aware of:

Extra fees and charges 

As well as paying interest on your used car loan, you will most likely also pay fees and charges. These can include application fees, annual fees, early exit fees, ongoing monthly fees and more. It is important to read the Product Disclosure Statement (PDS) and check your lender’scredit guide or any relevant fact sheets before you sign on the dotted line.  

It’s also important to check whether your lender charges fees for making extra repayments, to account for the interest they will lose. Commonly found on fixed interest rate loans, these fees can also affect variable interest rate loans, so check the fine print.

The comparison rate 

As a helpful guide to total cost, you can also look at a loan’s ‘comparison rate’. From July 2003, the Australian government made it mandatory to display a loan’s comparison rate alongside its advertised interest rate. This bundles the advertised rate along with the main fees and chargesin a single interest rate. This is to give borrowers a more accurate understanding of what theloan will cost – although this rate does not include every cost, nor does it account for added rewards or benefits that may impact your decision.

Redraw facilities

Some used car loans will also offer what is called a redraw facility. If you are ahead in your repayment schedule, and find yourself in financial difficulty, you can “redraw” any extrarepayments. As with all financial products, it is worth asking if the lender has any restrictions on how exactly this redraw facility is used.  

Safety inspections

In Australia, if you are buying a used car, it’s important to check the history of the car, in case it has been written off or damaged previously. The Personal Property Security Register (PPSR), formerly known as REVS, helps to protect consumers buying used cars. A PPSR search is a basic check for financial interests, written-off records and stolen vehicles, so you can be aware of the history of the car before you buy it.

Used car insurance

Loan protection insurance is often sold as an add-on in car dealerships, to help you make repayments if you experience financial difficulties. If you feel you will struggle to make your repayments, it may be wiser to save a larger deposit, and borrow a smaller loan amount than pay for insurance. However, if you would like the reassurance of loan protection insurance, shop around. Dealership insurances can have high fees, so comparing used car loan insurance could save you money in the long term.