Car Loan Interest Rates Forecast 2026: What to Expect

Car loan interest rates in Australia have been relatively stable over the past six months, but there are several factors that could influence pricing during the remainder of 2026. Whether you are planning to buy a new or used car, understanding the rate outlook can help you time your purchase and financing to secure the best possible deal. This article analyses the current rate landscape, the key factors driving car loan pricing, and our forecast for where rates are heading.

Current Car Loan Rate Landscape

As of early 2026, competitive car loan rates in Australia are broadly as follows. Secured new car loans for borrowers with good credit start from approximately 5.99 per cent. These are fixed-rate loans secured against the vehicle, typically with terms of three to seven years. Secured used car loans are slightly higher, starting from around 6.49 per cent, reflecting the higher risk associated with financing an older asset. The vehicle's age significantly affects pricing, with most lenders offering their best rates for vehicles less than five years old. Green car loans for electric and hybrid vehicles start from approximately 5.49 per cent, representing a meaningful discount over standard rates. This discount reflects the lower perceived risk (newer technology, lower depreciation on popular EVs) and lenders' desire to support environmentally conscious lending. Unsecured car loans, where the vehicle is not used as security, range from approximately 7.99 per cent to 14.99 per cent depending on the borrower's credit profile and the lender. Low-doc car loans for self-employed borrowers or those with limited income documentation start from around 7.49 per cent for secured products.

Factors Influencing Car Loan Rates in 2026

1. RBA Cash Rate Movements

While car loan rates are not directly pegged to the RBA cash rate (unlike variable home loans), the cash rate influences wholesale funding costs for lenders, which indirectly affects the rates they offer on car loans. Most economists forecast one to two cash rate cuts during 2026, which could put modest downward pressure on car loan rates in the second half of the year. However, the relationship is not linear. Car loan rates did not increase as dramatically as home loan rates during the tightening cycle, and they may not decrease as much during any easing cycle.

2. Lender Competition

Competition among car loan lenders is intense in 2026, which is positive for borrowers. The car finance market includes traditional banks, non-bank lenders, fintech lenders, and credit unions, all competing for market share. This competitive dynamic tends to keep rates lower than they would be in a less fragmented market. Several fintech lenders have entered the Australian car loan space in recent years, offering streamlined digital applications and competitive pricing. This has forced traditional lenders to sharpen their rates and improve their customer experience.

3. Vehicle Market Dynamics

New car supply has largely normalised after the pandemic-era shortages, and prices for many models have stabilised or even decreased slightly. Used car prices, which spiked dramatically in 2022-2023, have also moderated, though they remain above pre-pandemic levels for popular models. The normalisation of the vehicle market is positive for car loan rates because lenders face lower risk when the underlying asset (the car) holds its value well. When used car prices were declining rapidly in late 2023, some lenders tightened their lending criteria and margins. With prices now stable, lending conditions are more favourable.

4. Credit Risk and Employment

Lenders assess the risk of default when pricing car loans. The Australian labour market remains relatively strong, with unemployment hovering around 4 per cent. Strong employment supports car loan performance (fewer defaults), which allows lenders to offer competitive rates. If unemployment rises materially, lenders may tighten criteria and increase margins to compensate for higher expected losses. This is not our base case for 2026, but it is a risk worth monitoring.

Our Rate Forecast for 2026

Based on our analysis of the factors above, we expect the following trajectory for car loan rates during 2026. First half of 2026: Rates are likely to remain broadly stable at current levels. The competitive landscape will keep rates in check, and stable economic conditions provide no impetus for significant changes. Second half of 2026: If the RBA delivers one or two cash rate cuts as markets expect, we could see modest reductions of 0.15 to 0.35 per cent in car loan rates. The best secured new car rates could fall to around 5.70 to 5.90 per cent, while green car loans could dip below 5.25 per cent. For used car loans, the decline may be slightly smaller, with rates settling around 6.20 to 6.40 per cent for borrowers with good credit and newer vehicles.

Should You Wait for Rates to Fall?

This is the most common question we receive, and the honest answer is: probably not. The potential rate reduction is modest — perhaps 0.25 to 0.35 per cent over the next six to twelve months. On a $40,000 car loan over five years, a 0.30 per cent rate difference equates to approximately $350 in total interest over the life of the loan. Meanwhile, waiting has its own costs. If the car you want increases in price, or if you are currently paying for repairs and maintenance on an older vehicle, the cost of waiting may exceed the interest savings. The more impactful decision is shopping around and comparing rates from multiple lenders. The difference between the best and worst car loan rates on the market at any given time can be 2 to 4 per cent, which is far more significant than any rate movement during the year. A borrower who secures a rate 1 per cent lower by comparing lenders saves approximately $1,100 on a $40,000 five-year loan.

Tips to Get the Best Car Loan Rate

To secure the most competitive rate, consider the following strategies. First, check your credit score before applying. Lenders offer their best rates to borrowers with strong credit histories. If your score needs work, spending a few months improving it before applying could save you significantly. Second, consider a secured loan rather than an unsecured loan. Secured loans are typically 2 to 5 per cent cheaper because the lender has the vehicle as collateral. Third, choose a shorter loan term if affordable. While longer terms reduce monthly repayments, they increase total interest paid and often attract slightly higher rates. Fourth, use a finance broker to compare across multiple lenders. Brokers can access wholesale rates that may not be available directly, and they can negotiate on your behalf. Finally, get pre-approval before you shop for a vehicle. This gives you a clear budget, strengthens your negotiating position with the dealer, and avoids the pressure of arranging finance at the point of sale.