Everything you need to know about car finance in Australia — how loans work, what you'll pay, types available, broker vs bank, and what to do if your situation isn't straightforward. One guide. 60+ lenders compared.
A car loan is a form of personal or commercial finance used to purchase a vehicle. The lender provides funds to buy the car (or pays the seller directly), and you repay the lender over an agreed term — typically 3 to 7 years — with interest.
Most car loans in Australia are secured, meaning the car itself acts as collateral. The lender registers a security interest on the PPSR (Personal Property Securities Register), and if you default on the loan, the lender can repossess the vehicle to recover the outstanding balance. Once the loan is fully repaid, the security is removed and you own the car outright.
The monthly repayment consists of two components: principal (paying back what you borrowed) and interest (the cost of borrowing). On a fixed-rate loan — which is the most common type in Australia — your repayment amount stays the same for the entire term.
On a $35,000 car loan at 7.5% p.a. over 5 years:
That $7,100 in interest is the real price of borrowing. It's why the interest rate matters — and why even a 1–2% difference between lenders can save or cost you thousands.
How it works: The car is used as security for the loan. You own the car, but the lender has a registered interest on the PPSR until the loan is repaid.
Rates: The lowest available — currently averaging around 7.4% p.a. for prime borrowers with clean credit and newer vehicles. Rates start from approximately 5.7% p.a. at the most competitive lenders.
Vehicle restrictions: Most lenders require the car to be under a certain age at the end of the loan term — typically 7 to 12 years old. A 10-year-old car financed over 5 years needs to meet the lender's age cap at year 15.
Best for: Most car buyers. If the car qualifies for secured finance, this is almost always the cheapest option.
How it works: No asset is used as security. The lender assesses your creditworthiness and income to determine eligibility and rate.
Rates: Higher than secured — currently averaging around 11.8% p.a. according to market data. Some lenders offer unsecured rates from 9.5% for borrowers with excellent credit.
Vehicle restrictions: None. Because the car isn't used as security, you can buy any vehicle — including older cars, classics, and imports that don't qualify for secured finance.
Best for: Buying older vehicles (10+ years) that don't meet secured loan age requirements, or situations where you don't want the lender to have a claim on your car.
How it works: A commercial finance product for ABN holders buying a vehicle used predominantly for business. You own the car from day one, and the lender holds a mortgage over it as security. Potential tax benefits include GST credits, interest deductions, and depreciation claims.
Rates: Competitive — often similar to or better than consumer secured rates for established businesses with clean credit.
Best for: Self-employed borrowers, sole traders, and business owners buying a vehicle that's used more than 50% for business. See self-employed car loan options.
How it works: A three-way arrangement between you, your employer, and a finance company. Your car repayments and running costs are bundled into pre-tax salary deductions. Only available if your employer offers salary packaging.
Rates: Vary by arrangement. The headline savings come from the tax benefit of pre-tax deductions, not necessarily from a low interest rate.
Best for: PAYG employees whose employer offers salary packaging. Not available to self-employed or business owners.
How it works: The car dealer arranges finance through their finance partner (usually one or two lenders). Convenient — you can sort the car and the finance in the same visit.
Rates: Typically the most expensive option. Dealers act as introducers and receive a commission, which can add 2–4% to the rate compared to a broker or bank for the same credit profile.
Best for: Situations where speed and convenience matter more than cost. Always get a broker or bank quote first to use as a benchmark.
| Loan type | Typical rate range | Ownership | Vehicle age limit | Best for |
|---|---|---|---|---|
| Secured car loan | 5.7% – 10% p.a. | You own the car. Lender holds security. | Usually under 7–12 years at end of term | Most buyers |
| Unsecured personal loan | 9.5% – 15%+ p.a. | You own the car outright. | No restrictions | Older cars, imports, classics |
| Chattel mortgage | 5.5% – 10% p.a. | You own the car. Lender holds mortgage. | Varies | ABN holders, business use 50%+ |
| Novated lease | Varies | Finance company owns during term | Varies | PAYG employees with salary packaging |
| Dealer finance | 8% – 16%+ p.a. | You own the car. Lender holds security. | Varies | Convenience when rate isn't priority |
Rates current as of June 2026. Individual circumstances vary. Subject to lender criteria and approval.
The RBA cash rate sits at 4.35% as of May 2026. Car loan rates track above the cash rate with a margin that reflects the lender's cost of funds, risk assessment, and competitive positioning.
Here's where rates sit across different borrower profiles in mid-2026:
| Your profile | Secured rate range | $35,000 loan over 5 years |
|---|---|---|
| Excellent credit (700+), new or near-new car | 5.7% – 7.5% p.a. | ~$670 – $702/month |
| Good credit (600–700), car under 5 years old | 7.0% – 9.0% p.a. | ~$693 – $727/month |
| Average credit (500–600) or car 5–8 years old | 8.5% – 11.0% p.a. | ~$719 – $761/month |
| Below-average credit (under 500), defaults | 11.0% – 15%+ p.a. | ~$761 – $833+/month |
| Self-employed, low-doc | Add 0.5% – 2% to above | Depends on base profile |
Rates current as of June 2026. Comparison rates will be higher once fees are included. Individual circumstances vary. Subject to lender criteria and approval.
Your credit score. The single biggest factor. A clean credit file (no defaults, no late payments, good repayment history) unlocks the best rates. Credit issues push rates up or narrow lender options.
The vehicle's age and type. Newer cars from mainstream brands hold value better, giving lenders stronger security. Rates step up as cars age past 3, 5, and 7 years. Cars over 10–12 years old often can't be financed on a secured basis.
Secured vs unsecured. Secured loans are cheaper because the lender can recover the car if you default. The gap between secured and unsecured averages 3–4% p.a. — on a $35,000 loan, that's roughly $3,500–$5,000 in extra interest over five years.
The lender. Different lenders price differently for the same borrower profile. A broker compares across the market; a bank offers only their own products.
This is the question that determines how much you'll pay and how smooth the process will be. Each channel has strengths and weaknesses.
| Factor | Bank (direct) | Broker (like Novara) | Dealer finance |
|---|---|---|---|
| Lenders compared | 1 (their products) | 60+ across the market | 1–2 (dealer's partners) |
| Rates | Competitive for their own customers | Access to competitive rates across all lenders | Typically highest — dealer margin added |
| Credit checks | Each application = hard enquiry | Pre-assessment first, then one matched application | Application = hard enquiry |
| Speed | 1–10 business days | 24–48 hours typical | Same-day possible (convenience) |
| Cost to you | No fee, but only one set of rates | No upfront fee. Broker paid by lender on settlement. | No fee, but rate includes dealer commission |
| Best for | Clean credit, existing bank customers | Everyone — especially complex situations | Speed/convenience when rate isn't the priority |
| Worst for | Bad credit, self-employed, unusual situations | Simple deals where your bank is already competitive | Anyone who cares about paying the lowest rate |
The honest take: If you have excellent credit and a strong relationship with your bank, going direct can work well. For everything else — and that's most people — a broker comparison costs nothing, protects your credit score from multiple enquiries, and typically delivers a better outcome. Read the detailed broker vs bank comparison.
If you're over 18, have a regular income (PAYG or self-employed), hold a valid Australian driver's licence, and have a reasonable credit history — you'll likely qualify for a car loan. The main variables are the rate you'll get and the amount you can borrow, which depend on your income, expenses, existing debts, and credit score.
No previous car loan history doesn't disqualify you. Lenders look at your overall credit history (phone contracts, credit cards, rent payments if reported) and your income stability. Having a deposit, even a modest one, strengthens a first application.
If you're self-employed, a sole trader, or running a business, standard income verification (payslips) doesn't apply. Low-doc car loans and chattel mortgages use BAS statements, business bank statements, or an accountant's letter instead. The low-doc rate premium is typically 0.5–2% above standard rates. See self-employed car loan options.
Defaults, late payments, low credit scores, and even previous bankruptcy don't automatically lock you out. Specialist lenders work with non-conforming credit profiles — the rates are higher and a deposit may be required, but pathways to approval exist at every credit tier. A broker is essential in this situation. See bad credit car loan options.
Some lenders accept Centrelink payments (including the Age Pension, Disability Support Pension, and Family Tax Benefit) as income for car loan purposes. Borrowing amounts are typically lower than for salaried applicants, and not all lenders participate — a broker can identify those that do.
Before you do anything else, check your credit report. Under the Privacy Act 1988, you're entitled to a free report every three months from each bureau (Equifax, Experian, illion). You can also use free services like Credit Savvy for ongoing access.
Knowing your score tells you where you stand and which lender tier you'll likely fall into. It also lets you catch and dispute any errors — incorrect defaults or late payments can drag your score down unfairly.
Be realistic about what you can afford. The car's price is only part of the cost. Factor in:
A common guideline is that your total car costs (repayments + insurance + running costs) shouldn't exceed 15–20% of your after-tax income.
Pre-approval gives you a confirmed borrowing amount and an indicative rate before you start car shopping. This is one of the most valuable steps most buyers skip. See our full guide to car loan pre-approval.
Why pre-approval matters:
With pre-approval in hand, shop with confidence. Whether you're buying from a dealer or private seller, you know exactly what you can spend.
Buying from a dealer: Straightforward. The lender pays the dealer directly on settlement.
Buying from a private seller: Most lenders finance private sale purchases, but additional steps are required — typically a PPSR check (to confirm the car isn't encumbered by existing finance) and sometimes an independent valuation. Your broker handles this process.
Once you've found the car and your application is formally approved, the lender settles the loan — paying the dealer or seller directly. Settlement typically takes 1–3 business days after all documents are signed. The lender registers their security interest on the PPSR, and you drive away.
Look beyond the interest rate. Common fees include:
The comparison rate includes most fees and gives a more realistic picture of the true cost. Always ask for the comparison rate alongside the advertised rate. ASIC MoneySmart has more on understanding comparison rates.
A balloon payment is a lump sum due at the end of the loan term. It reduces your monthly repayments during the loan but creates a final obligation. On a consumer car loan, balloon payments are less common than in commercial finance (chattel mortgages) — but some lenders offer them.
Before agreeing to a balloon, understand: you'll need to pay it, refinance it, or sell the car to cover it at the end of the term. If the car has depreciated below the balloon amount, you'll owe the difference out of pocket.
If your car is written off or stolen, your insurer pays the market value at the time — which may be less than what you still owe on the loan. Gap insurance covers the difference. It's worth considering for new cars that depreciate quickly in the first 1–2 years, or for loans with a high loan-to-value ratio (small deposit or no deposit).
Already in a car loan and wondering if you're paying too much? Refinancing replaces your current loan with a new one — ideally at a lower rate.
There's no universal minimum. Mainstream banks generally prefer 600+ on the Equifax scale. Specialist lenders work with scores of 400–500 and sometimes lower. The rate you pay increases as your score decreases.
It depends on your income, existing debts, living expenses, and credit profile. As a rough guide, most lenders cap car loan repayments at around 15–20% of your after-tax income. On a $70,000 annual salary (after tax ~$55,000), that's approximately $690–$920/month in repayments, which supports a loan of roughly $30,000–$45,000 depending on the rate and term.
A bank offers one set of products. A broker compares across 60+ lenders and matches you to the best fit. For clean-credit, straightforward purchases, both work well. For complex situations (bad credit, self-employed, older vehicles), a broker typically delivers a better outcome and protects your credit score from multiple enquiries. See the full broker vs bank comparison.
Yes. Specialist lenders work with defaults, late payments, and low credit scores. Rates are higher (typically 9–15%+ p.a.) and a deposit may be required, but options exist at every credit tier. A broker is essential for bad-credit applications. See bad credit car loan options.
Yes. Pre-approval gives you a firm budget, protects you from dealer finance pressure, and lets you negotiate the car price as a cash buyer. It's one of the simplest steps that saves people the most money.
Most lenders allow early repayment, but some charge an early termination fee. Check your loan contract for early payout terms before signing. If you're planning to pay off early, choose a lender with no or low early repayment fees.
Contact your lender or broker immediately. Hardship arrangements (reduced repayments, payment pauses) are available under Australian Consumer Law. Acting early gives you more options. If you default without making arrangements, the lender can repossess the vehicle to recover the outstanding balance.
Through a broker: typically 24–48 hours for straightforward applications. Through a bank: 1–10 business days depending on the bank and complexity. Dealer finance: sometimes same-day but often at a higher rate.
Yes. Most lenders finance private sale purchases. Additional steps include a PPSR check to confirm the car is free of existing finance, and sometimes an independent valuation. Your broker handles this process.
Not always. Many lenders offer 100% finance for newer vehicles with clean-credit applicants. A deposit reduces the amount you borrow (and therefore the total interest you pay) and can improve your rate. For bad-credit applicants, a deposit of 10–20% is usually expected. Even a small deposit signals commitment to the lender and strengthens your application.
A secured loan uses the car as collateral — the lender can repossess it if you default. An unsecured loan has no collateral. Secured loans are cheaper (averaging ~7.4% vs ~11.8% for unsecured in mid-2026) because the lender's risk is lower.
Only if the car is used for business purposes and financed through a business structure like a chattel mortgage. Consumer car loan interest on a personal vehicle is not tax-deductible. If you're self-employed and the vehicle is used for business, talk to your accountant about structuring the finance for tax efficiency. See chattel mortgage and tax benefits for self-employed.
Whatever your situation — first car, family upgrade, self-employed, bad credit, refinancing — this guide and its supporting pages cover the detail you need to make an informed decision.
Novara Finance is a broker, not a bank. We compare car loans across a panel of 60+ lenders and find the best fit for your circumstances — whether that's the lowest rate, the fastest approval, or the lender most likely to say yes when others have said no.
60 seconds. No impact to your credit score. Talk to a Novara broker and find out your options today.
This article provides general information only and does not constitute financial advice. Consider your own circumstances and seek independent advice where appropriate. All car loan applications are subject to lender criteria and approval. Rates mentioned are indicative and current as of June 2026 — individual circumstances vary. Novara Finance Pty Ltd | AFSL 517192 | ABN 99 687 789 144.