Car loans: how to compare car finance for a new or used car
A car loan is a personal loan used to buy a vehicle, usually secured by the car and repaid over one to seven years. The cheapest one for you is the loan with the lowest total cost (interest plus every fee) for your amount and term, not the lowest advertised rate. As a benchmark, the RBA's average rate on new personal fixed-term loans, which include car loans, was 9.40% in July 2026; at that rate a $30,000 loan over 5 years costs about $629 a month.
This guide covers how car loans are priced, new versus used, dealer finance versus a bank or online lender, balloon payments, pre-approval and the checks that stop you buying a car with someone else's debt attached. Our car loan calculator, linked at the end of this page, tests your own numbers.
By Better Rate Mate Editorial Team · Last reviewed
How car loans work
Most car loans are secured: the car is the security, so if you stop paying, the lender can repossess and sell it. Security lowers the lender's risk, which is why secured car loans usually cost less than unsecured personal loans. The lender registers its interest on the Personal Property Securities Register (PPSR) until the loan is repaid.
Moneysmart says car loans usually run for one to seven years. Rates can be fixed, so repayments never change, or variable, so they move with the lender's rate. Variable loans usually have no early exit fee, which suits you if you plan to pay the loan off early; fixed loans may charge one.
What car loans cost
The RBA publishes average rates on personal loans each month from lenders' returns to APRA. There's no separate car loan series: car loans sit inside personal fixed-term loans. In July 2026, new fixed-term loans averaged 9.40% overall, 10.48% on fixed rates and 8.22% on variable rates. Your rate depends on your credit history, income, the loan amount and term, and the car itself, especially its age.
Rate is only part of the cost. Moneysmart lists the common fees: an establishment fee, a broker fee if a broker arranges the loan, a dealer or introducer fee if a dealership refers you, and ongoing fees such as a monthly service fee, plus default fees if you miss payments. It also points to an ASIC review of more than 350,000 car loans that found big differences in the fees people paid.
| Loan amount | 7.00% | 8.00% | 9.40% | 10.00% | 12.00% |
|---|---|---|---|---|---|
| $10,000 | $198 | $203 | $210 | $212 | $222 |
| $20,000 | $396 | $406 | $419 | $425 | $445 |
| $30,000 | $594 | $608 | $629 | $637 | $667 |
| $40,000 | $792 | $811 | $838 | $850 | $890 |
| $50,000 | $990 | $1,014 | $1,048 | $1,062 | $1,112 |
New vs used car loans
Lenders price car loans partly on the vehicle. A new or near-new car is easier to value and holds its value as security for longer, so it tends to get a lower rate than an older car. Many secured car loans have an age limit on the vehicle, either when you buy it or when the loan ends; an older car may only qualify for an unsecured personal loan, which usually costs more.
Buying privately raises its own risk: if the seller still owes money on the car, the lender's security can follow the car to you. Before you pay, search the car's VIN on the PPSR. A search costs $2 online and shows whether the car is recorded as free from debt, and may also show if it's recorded as stolen or written off.
| New or near-new car | Older used car | |
|---|---|---|
| Typical loan type | Secured car loan | Secured if the car is within the lender's age limit; otherwise unsecured |
| Rate | Usually lower | Usually higher, especially unsecured |
| Checks before you buy | Drive-away price, dealer add-ons | PPSR search, service history, independent inspection |
| Balloon available | Often | Less often |
Dealer finance vs a bank or online lender
Dealer finance is convenient because you sign for the car and the loan in one place, but the dealer is usually introducing you to a lender and can be paid for it. Since 1 November 2018, ASIC's ban on flexible commissions has stopped lenders paying dealers more for setting you a higher interest rate. Dealers can still earn fees and commissions, so ask who the lender is, whether a broker is involved and what each party is paid, as Moneysmart suggests.
Two things to watch at the dealership. First, add-on insurance (gap, loan protection, tyre and rim, extended warranty): Moneysmart says it's usually poor value, dealers often earn a 20% commission on it, and salespeople must wait four days before selling it to you. Second, low or 0% finance offers: compare the drive-away price you'd pay with finance against the price you could negotiate paying cash or with a pre-approved loan, and check for a balloon.
A bank, credit union or online lender lets you arrange the loan before you shop. With pre-approval you know your budget and can negotiate on the car's price alone. Pre-approval is conditional and expires, and each formal application is recorded as a credit enquiry, so don't apply with lots of lenders at once.
Balloon payments and guaranteed future value
A balloon (or residual) is a lump sum left owing at the end of the loan. It lowers your regular repayments because you're paying off less of the loan along the way, but you pay interest on the balloon for the whole term, so the loan costs more overall. On $30,000 over 5 years at 9.40%, a 30% balloon cuts the monthly repayment from $629 to $511, but adds $1,915 in interest, and you still owe $9,000 at the end.
The risk is that the car is worth less than the balloon when it falls due. Moneysmart warns that if you have to sell the car, the price may not cover the debt. Guaranteed future value (GFV) products, offered through some manufacturers, let you hand the car back for a set value at the end, but only within kilometre limits and if it's in good condition.
| Balloon | Monthly repayment | Total interest | Owing at the end |
|---|---|---|---|
| 0% | $629 | $7,715 | $0 |
| 10% | $589 | $8,354 | $3,000 |
| 20% | $550 | $8,992 | $6,000 |
| 30% | $511 | $9,631 | $9,000 |
| 40% | $471 | $10,269 | $12,000 |
How to compare car loans
Compare the comparison rate, which combines the interest rate with most fees, for the same amount and term. Lenders must calculate it on a set example (for loans this size, usually $30,000 over 5 years or $10,000 over 3 years), so it's only exact for that example. On a smaller loan, a flat establishment fee pushes the real cost well above the advertised comparison rate. The car loan calculator shows the all-in rate for your own amount and term.
- Get the interest rate, comparison rate and every fee in writing
- Check early repayment fees and whether you can make extra repayments
- Price the loan with and without a balloon
- Budget for the whole cost of the car: stamp duty, registration, insurance, fuel and servicing
- Ask whether the loan is secured and what happens if you sell the car before it's paid off
Car loan or novated lease?
If your employer offers salary packaging, a novated lease can be cheaper than a loan, especially for an electric car that qualifies for the FBT exemption. It ties the car to your job and ends with a residual, so compare a real lease quote against a loan with the novated lease calculator.
What to watch for
- The comparison rate is only exact for the lender's example amount and term. Ask for the total cost of your loan.
- A balloon lowers repayments but raises the total interest, and the car may be worth less than the balloon when it's due.
- Add-on insurance at the dealership is optional, often poor value, and can't be sold to you until four days after you agree to buy the car.
- Search the PPSR for $2 before buying privately, so you don't inherit someone else's car debt.
- Each loan application adds an enquiry to your credit report that stays for five years.
- If you fall behind, ask the lender about a hardship variation before you miss a payment.
Common questions
What are the repayments on a $30,000 car loan?
About $629 a month over 5 years at 9.40% (the RBA's average rate on new personal fixed-term loans in July 2026), with total interest of about $7,715. At 8% it's $608 a month and at 12% $667. Fees and a balloon change the figure; the car loan calculator includes both.
How much is a $40,000 car payment for 60 months?
About $838 a month at 9.40%, or $811 at 8% and $850 at 10%, before fees and with no balloon.
What's the smartest way to pay for a car?
Paying cash avoids interest entirely. If you need finance, get pre-approval from a lender before you shop so you can negotiate on price, compare the total cost of the loan rather than the rate, and avoid a balloon unless you have a plan to pay it. If your employer offers salary packaging, compare a novated lease too.
Are any car dealers offering 0% finance?
Manufacturers and dealers do run low or 0% finance offers on some models. Check the drive-away price against what you could pay without the offer, whether there's a balloon or a guaranteed future value condition, and every fee. A 0% rate on a higher price can cost more than a normal loan on a lower one.
What is a good car loan rate in Australia?
As a benchmark, new personal fixed-term loans (which include car loans) averaged 9.40% in July 2026, according to the RBA. Secured loans on newer cars for borrowers with good credit are usually priced lower than unsecured loans or loans on older cars. Compare comparison rates for the same amount and term.
Which bank is giving the cheapest car loan?
There's no single cheapest lender for everyone, because rates depend on your credit history, the car and the loan. We don't rank lenders. Ask several for a written quote for your amount and term and compare the total cost, including fees.
About rates on this page
We don't quote lenders' rates: they change often, depend on your credit history and we don't have a live feed. The averages here are the RBA's published figures for the month shown. Ask any lender for its interest rate, comparison rate and every fee in writing before you apply. This is general information, not financial advice.
