Car Loan Calculator

Understanding Comparison Rates

When comparing car loans, the advertised interest rate does not tell the full story. Lenders may charge establishment fees, ongoing monthly fees, early repayment penalties, or exit fees that increase the true cost of the loan. The comparison rate was introduced under Australian law to give consumers a more accurate picture of a loan's total cost.

A comparison rate combines the interest rate with most fees and charges into a single percentage figure, making it easier to compare loans on a like-for-like basis. For example, a loan advertised at 5.49% with high fees might have a comparison rate of 7.20%, while a loan at 5.99% with minimal fees might have a comparison rate of 6.10% — making the second loan cheaper overall despite the higher advertised rate.

How Car Loan Repayments Work

Car loans in Australia are typically structured as fixed-rate, fully amortising loans. This means your repayment amount stays the same each month for the entire loan term, and each payment covers both principal and interest. In the early months, a larger portion of each payment goes toward interest. Over time, as the principal decreases, more of each payment goes toward paying down the loan balance.

For example, on a $45,000 car loan at 5.99% over 5 years, your monthly repayment would be approximately $870. In the first month, about $225 of that payment covers interest and $645 reduces the principal. By the final year, nearly the entire payment goes toward principal. Over the full 5-year term, you would pay approximately $7,200 in total interest, making the total cost of the car $52,200.

Secured vs Unsecured Car Loans

A secured car loan uses the vehicle itself as collateral. If you default, the lender can repossess the car. Because the lender has security, secured loans offer significantly lower interest rates — typically 4.5-8% compared to 9-15% for unsecured loans. Most car loans in Australia are secured, and this is the option we recommend for most borrowers.

An unsecured car loan (essentially a personal loan used to buy a car) does not use the vehicle as security. While you will not risk repossession of the specific vehicle, unsecured loans carry higher rates and may have stricter eligibility requirements. They can be useful if you are buying an older vehicle that some secured lenders will not finance.

New Car vs Used Car Finance

Interest rates for new car loans are generally lower than for used cars. This is because new cars have a more predictable resale value, providing better security for the lender. The rate difference is typically 0.5-1.5% — for a $45,000 loan, this can mean $500-$1,500 difference in total interest paid. Most lenders define "new" as less than 2 years old with under 20,000 km.

Used car loans may also have shorter maximum terms. While a new car loan might extend to 7 years, many lenders cap used car loans at 5 years, particularly for vehicles older than 5 years at the time of purchase. The general rule is that the loan term should not extend beyond the useful life of the vehicle — lenders typically require the car to be no older than 12-15 years at the end of the loan term.

Tips for Getting the Best Car Loan Rate

Getting the best possible car loan rate requires preparation. Start by checking your credit score — a score above 700 opens access to the best rates from most lenders. Get pre-approved before visiting a dealer so you have a benchmark rate and are not reliant on dealer finance. Consider a shorter loan term if your budget allows, as this typically attracts lower rates.