Wondering how to get a car loan in Australia? Getting approved is more straightforward than most people expect. This guide walks you through the whole process — from the documents you need and eligibility criteria to comparing rates and getting approved quickly through a broker.
How to Get a Car Loan: What You Need to Apply
- You need to be a minimum age of 18,
- citizen or permanent resident (some visas will be considered)
- 100 points of ID (at least): can include your driver’s licence, passport, Medicare card and more
- The vehicle details: the make and model and age of vehicle to begin with as well as whether it’s new or pre-owned
- Proof of income: you might need two recent payslips
- Assets and liabilities: details on any properties you own, any other loans you have, your ongoing expenses and any other debts, such as credit cards.
Which Is Better: Car Finance or a Loan?
We can’t give personal advice on which is better, because it depends on your individual circumstances. Car finance and an unsecured personal loan are assessed in a very similar way. The biggest difference is that car finance would be secured against the vehicle at a lower rate than an unsecured loan.
How Do I Get a Zero Interest Car Loan?
– very low advertised rates on new cars are often what’s called dealer subvention campaigns. They are a marketing tool used by the manufacturer to encourage the sale of a specific vehicle or run-out model, where the manufacturer effectively covers part of the financing cost as a marketing expense. It’s worth remembering that there may be a lot of T&Cs and restrictions attached to those campaign offers
How Does a Car Loan Work When You Get One?
The financier lends the customer the money to buy a new or used vehicle. It can be secured (the asset as security) or unsecured (higher interest rate). If the vehicle is the security on the loan then it will be required to have full comprehensive insurance. Finance can include on road costs and payments can be fixed with loan terms up to 7 years.
What’s the best duration of a car loan? Terms can range between 1-7 years. Longer terms tend to carry higher interest rates, but will provide the lower repayments
What will affect your car loan’s interest rate? The rate depends on multiple factors, but the following are the main ones:
- Purpose of the Lend – Business or Private usage will determine the loan product
- Asset Backing – if you are a property owner, it would generally get lower rates, though it is important to note that the property won’t be used as security. It just helps achieve a lower rate.
- Age of asset – new vs used. Build date of the vehicle will impact the rate
- LVR – Loan to value ration will also impact rate. i.e large deposit can help reduce the rate
- Other factors such as credit score, checkable credit history, age of applicant, vehicle price and if under business – age of ABN and GST registration.
How to Get a Car Loan Approved Faster
The fastest way to get a car loan approved is to have your paperwork ready and your finances in order before you apply. Preparing properly means checking your credit score, gathering proof of income, and comparing lenders before you commit. A specialist car finance broker can compare offers from 40+ lenders on your behalf.
Whether you are buying a new car or a used car, the process is broadly the same: apply, get assessed, receive approval, and settle. For an independent overview of your rights and responsibilities, the MoneySmart car loans guide is a helpful reference.
Choosing a loan that suits your budget also means looking beyond the advertised interest rate to the comparison rate, fees, and loan term. Getting the structure right from the start can make a significant difference over the life of the loan.
What Happens After Your Car Loan Is Approved
Approval is not the same as settlement, and the gap between the two is where most delays happen. Once a lender approves your application it issues a formal approval setting out the amount, the term and any conditions attached. Those conditions commonly include sighting the vehicle details, confirming comprehensive insurance is in place, and verifying the seller, whether that is a dealership or a private party.
Settlement is the point at which the lender actually pays the funds to the seller. For a dealership purchase this is usually straightforward, because dealers deal with financiers daily and have the paperwork ready. A private sale takes longer, since the lender needs to confirm ownership, check the vehicle is not encumbered by an existing loan, and pay the seller directly rather than handing over funds to you.
The practical thing you can do is have the vehicle details and insurance sorted before approval comes through, rather than after. Approvals carry an expiry date, and letting one lapse means the assessment has to be redone. If you are still choosing a vehicle, ask for a pre-approval instead so you know your budget before you start negotiating.
