Compare some of the best car loans Australia wide

You already know there are a variety of vehicle makes and models that best suit different buyers and lifestyles, but you may not realise there are just as many different car loans that may best suit your financial situation.

This means there is no one ‘best’ car loan. To find your best car loan, you’ll want to compare a variety of options, including their interest rates, fees, and features, to narrow down one that fits your goals and budget.

Generally speaking, the best car loan can:

• Help you achieve your financial goals
• Come with a competitive interest rate;
• Charge little to no fees;
• Belong to your preferred financial institution;
• Provide loan features (if this is important to you); and
• Suit your financial situation and budget.

For example, the best car loan for one Aussie may mean it comes with the lowest interest rate possible, and for another borrower, their best car loan may be one that charges a higher interest rate but comes with helpful features, like making additional repayments.

RateCity helps you to find and compare car loans across the Australian market so you can drive away with your ideal loan option with confidence.

Your best interest rate offer will vary depending on several factors, including when you are ready to take out a car loan and your personal financial situation.

Car loan interest rates fluctuate with the Reserve Bank of Australia’s (RBA) cash rate and the market, particularly for variable rate loans. The interest rate offered on a car loan today may be higher or lower in a month’s time if the RBA were to change the cash rate.

Further, lenders will assess your financial situation and credit history to determine the rate they may offer you. Being in a stable financial position and having a good to excellent credit score may mean a lender is more likely to offer you a lower rate, as there is less risk involved that you may default on the loan. If you have a bad credit rating, you may need to work to boost this before you apply to boost your chances of approval. 

The type of car loan you choose will also impact the interest rate offered, such as whether the interest rate is fixed or variable, or the car loan is secured or unsecured. Car loan interest rates generally vary between 2.99% and 10% for secured car loans, and up to 15% for unsecured car loans. The interest rate on a car loan may often be lower than on an unsecured personal loan as the loan is typically secured by the car you are purchasing.

With that in mind, you might find RateCity's Real Time Ratings^TM and Car Loan Leaderboard helpful, as they can provide you with up to date rankings based on how much the car loan will cost and how much flexibility it offers.

There are several factors that go into a car loan and to choose your best option you’ll need to decide which matter most in your comparison. To do this you can start by asking yourself some key questions:

Does it fit your budget?

Firstly, you need to know a car loan’s repayments will suit your budget. Take stock of your income and expenses and tally up how much you may be able to afford in car loan payments on an ongoing basis (weekly, fortnightly, or monthly repayments). The size of the loan, interest rate and fees charged by the lender will significantly impact your regular repayments, so try not to take on more debt than you can afford.

RateCity’s Borrowing Power Calculator may help you to discover how much you could afford to borrow with a car loan based on what you can comfortably afford to repay. You also need to factor in whether you can afford to pay the total cost of the loan, meaning the interest and fees on top of your regular repayments.

There are additional running and maintenance costs you’ll need to ensure you can afford before you apply for any car loan, including:

• Stamp duty
• Registration
• Car insurance
• Petrol costs
• Regular services, maintenance, and repairs
• Road tolls

Does it have competitive rates and fees?

As mentioned above, the interest rate and any fees charged can majorly impact the total cost of your car loan. This is why borrowers generally search for car loans with lower-than-average rates and few, if any, fees. This may include upfront fees like application fees or establishment fees, and ongoing fees like monthly fees or service fees.

One way to quickly assess if a car loan charges excessive interest or fees is to look at its comparison rate. The advertised rate of a car loan is just the interest rate you pay, but the comparison rate combines the advertised rate and the main fees, including any upfront and ongoing fees. This is based on a 5-year $30,000 loan. By looking at both the advertised rate and comparison rate, you may better understand the total cost of the car loan.

Does it offer the features you need?

Some car loan providers offer a range of helpful features attached to their loans, including the ability to make extra repayments without penalty, and a redraw facility. If these features are important to you, then this will need to be factored into your car loan comparison.

Keep in mind that car loan features more commonly come with variable rate loans, although some lenders may offer them with fixed rates. Further, by opting for a car loan with features, you’ll generally be charged a higher interest rate and/or fees (such as a redraw fee) for the privilege.

Is it suitable for the car you want to buy? 

You’ll also want to base your car loan choice on the type of car you want to buy. Car loan lenders offer different loans with different rates depending on if the vehicle is new or used, as well as if it is secured against the loan.

New cars may cost more than used cars, but generally a car loan lender may offer you a lower interest rate for opting for a new car loan. Further, if you offer up your vehicle as security on the loan, the lender typically may offer you a lower rate as well, as this reduces your risk of defaulting.

If you want to purchase a much older car (10+ years), you may find that few car loan lenders are willing to offer you a loan for it. Further, if you choose to not secure your vehicle to the loan and opt for an unsecured personal loan, you may find that interest rates are much higher on average.

Do you have enough time to pay it off?

Your loan term also plays a role in how much you will pay over the life of the loan. The shorter the car loan term (1-3 years) the higher your ongoing repayments will be, but the less interest you’ll pay over the life of the loan. A longer car loan term (4-7 years) may offer smaller ongoing repayments but as the loan term is extended, you may pay more in interest charges.

For example, here are how repayments may look on a $20,000 car loan at a rate of 5% over a 2-year term and a 5-year term:

Source: RateCity.com.au Car Loan Repayment Calculator

There is no one best bank or lender when it comes to taking out a car loan, but one thing is for certain - sticking with the same bank you’ve been with your whole life may not mean you’re offered your ‘best’ car loan.

You may find that other car loan lenders are able to offer you more competitive interest rates, lower fees or more features. Like with everything else mentioned above, you’ll simply need to compare your options and choose a lender that best suits your goals for the vehicle and financial situation.

For example, big banks in Australia may be able to offer you more convenience with customer service and a greater sense of security for your finances. They also may bundle or link your car loan with other products you already use, such as your bank account or home loan.

However, smaller lenders like credit unions, online lenders or neobanks may be able to offer lower interest rates on average due to having fewer overheads. For example, a car loan lender without any branches may be able to pass these savings on to their customers in the form of waived application fees.

To find your best car loan rate in Australia it’s crucial that you compare your options. And doing so is made easier with RateCity’s comparison tools.

Shopping around and making car loan comparisons is a key part of the process, and RateCity allows you to compare car loans by costs and features with its helpful tools, which can considerably reduce the time it takes for you to do your research.

Comparison tables

Comparison tables may help you to compare apples with apples by being able to view car loan options side by side. Simply enter the amount you want to borrow and the loan term, then filter out results based on the loan factors you care about. Then you can compare your options to see how they stack up on several factors, including interest rate, monthly repayments, and Real Time Ratings^TM score.

Repayment Calculator

RateCity’s Repayment Calculator can also come in handy when determining how factors such as the loan amount, interest rate and loan term will affect your repayments and the true cost of the loan. A loan calculator may help you shorten your list of options based on how they fit with your budget.

Real Time Ratings^TM

Real Time Ratings^TM is RateCity’s world-first rating system that ranks car loans based on your individual requirements. Unlike other comparison pages which rank their products once or twice a year, Real Time Ratings^TM results are calculated live, so they are up to date as possible. Each car loan is given a score out of five, based on loan costs and flexibility.

Once you’ve made a shortlist of your preferred finance options, it’s a good idea to check available documentation, such as the Product Disclosure Statement (PDS), so that you can make a well-informed decision.

Before submitting a loan application for your chosen loan, ensure you meet the eligibility criteria and consider reaching out to the loan provider if you have any questions. This can help to minimise the risk of having your application rejected and in turn damaging your credit score.

For more information on credit products specific to your personal circumstances, consider talking to a financial advisor.