Car loans: how to compare car finance rates and fees for a new or used car

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.

Average car loan interest rates

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 August 2026, new fixed-term loans averaged 9.50% overall, 10.44% on fixed rates and 8.32% on variable rates. These are rates people actually paid, not advertised rates, and they're the only car loan rate figures we publish because we don't have a live lender feed.

Your own rate depends on your credit history, income, the loan amount and term, and the car itself, especially its age. To see what a rate means in dollars, use the car loan repayments calculator.

What car loans cost beyond the rate

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.

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 calculator shows the cost including fees for your own amount and term.

What's the best car loan for you?

There's no single best car loan, because rates depend on your credit history, the car, the amount and the term, and we don't rank lenders. Judge every quote on the same criteria:

• The lowest total cost for your amount and term: interest plus every fee, from the establishment fee to monthly fees.
• The comparison rate, read at the legislated $30,000 over 5 years example, alongside the cost for your own loan.
• Early repayment terms: whether you can pay extra or pay out early without a fee (variable loans usually can).
• Whether there's a balloon, and how you'd pay it.
• Secured or unsecured: security usually lowers the rate, but ties the loan to the car.

Secured vs unsecured car loans

A secured car loan uses the car as security: Moneysmart explains that if you don't make the repayments, the lender can take the car and sell it to cover the loan. With an unsecured car loan the car isn't security, so the lender can't repossess it, but Moneysmart notes the interest rate is often higher.

A secured loan is usually the cheaper way to buy a newer car. An unsecured loan can suit an older car that falls outside a lender's age limit, or a buyer who wants to be free to sell the car before the loan is paid off. Our guide to secured vs unsecured loans covers repossession, the PPSR and guarantors, and what each percentage point of rate is worth.

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.

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.

Car loan pre-approval

A bank, credit union or online lender can pre-approve you before you shop, so you know your budget and can negotiate on the car's price alone. Pre-approval is conditional: the lender still has to approve the car and confirm your details, and the approval expires after a set time. Each formal application is recorded as a credit enquiry and stays on your report for five years, so don't apply with lots of lenders at once; ask whether a quote will be recorded before you proceed.

Pre-approval works for used cars too, but check the lender's vehicle age rules before you fall for a car it won't take as security.

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. The car loan balloon calculator shows the repayment, the extra interest and the lump sum for any balloon, and our guide to how balloon payments work covers your options when it falls due.

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.

Car loans on Centrelink

Centrelink doesn't offer car loans, and there's no "$5,000 Centrelink car loan". What Services Australia offers is an advance of part of your own payment: $250 to $500 on JobSeeker and similar payments, or up to $1,764.15 for a single pensioner, repaid over 13 fortnights. Some lenders count Centrelink income when you apply for an ordinary car loan, but they still have to check you can afford it.

If what you need is a car repair rather than another car, a No Interest Loan lends up to $2,000 for essentials, including car repairs, with no interest or fees, if you have a Health Care Card or Pension Card or meet the income limits; call 13 64 57. Our guides to loans with bad credit and the personal loans Centrelink table have the details.

Car loan checklist

Moneysmart suggests a checklist before you sign up for a car loan. This one combines its questions with the checks on this page:

• I have the interest rate, the comparison rate and every fee in writing, including any broker or dealer fee
• I know whether the rate is fixed or variable, whether there's an early repayment fee and whether I can make extra repayments
• I've priced the loan with and without a balloon, and over the shortest term I can afford
• I know whether the loan is secured, and what happens if I sell the car before it's paid off
• I can still afford the repayments if my situation changes
• I've budgeted for stamp duty, registration, insurance and running costs
• For a private sale, I've searched the car on the PPSR ($2)

Refinancing a car loan

Refinancing means replacing your car loan with a new one, usually for a lower rate, lower fees or a different term. The new lender pays out the old loan and registers its own security interest on the PPSR. It saves money only if the lower rate is worth more than the cost of switching.

Before you switch, ask your lender for a payout figure and whether an early repayment fee applies (more common on fixed-rate loans), then add the new loan's establishment fee. Lenders set age limits on the cars they'll take as security, so an older car may only qualify for an unsecured loan at a higher rate, and each application is a credit enquiry that stays on your report for five years. Price the remaining balance over the remaining term at both rates in the car loan calculator and compare the totals, fees included.

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 (see EV novated leases). 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.