New Car Loan

New cars are expensive, which leads the majority of new car buyers seeking some form of finance to help them purchase their new car. New Car Loans are a type of personal loan designed specifically for the purpose of funding the purchase of a new vehicle, which the lenders offer some of their most competitive lending rates on purely because the asset you are purchasing is brand new.

The comparison table below features a selection of the best new car loans and a loan repayment calculator that enables you to calculate what your monthly repayments would be for each of the new car loans.

Selecting the Best New Car Loan

 

A good first step when considering the new car  loan options, of which there are 100’s is to understand the key features of new car loans which will impact the cost of your loan, and assess these relative to how much you are looking to borrow, over what term

 

1. Fixed rate new car loan - This is a popular option with new car buyers who believe interest rates are going to rise during the term of their loan, as on a  fixed rate deal your interest rate will not change across the term of the loan. By fixing your interest rate your monthly repayments will be constant across the loan terms that can make budgeting for the repayments easier to manage.

 

2. Variable rate new car loan - Variable rate new car loans rates can fluctuate during your loan term, moving up or down at the discretion of the lender. The rates offered on variable rate new car loans are generally lower than the fixed rate loans and offer more flexibility through redraw facilities, extra payment options and no early repayment fees.

 

3. Comparison rate - Comparing the rates offered on new car loans can be very confusing, particularly when you start comparing loans offered by banks, building societies and credit unions with those offered by car dealers (more on that later). The comparison rate is designed to provide an interest rate for the car loan that includes not only the interest rate but also any fees which will be payable when taking out the loan, such as an application fee and any ongoing administration fees.

 

4. Loan application fee - This fee is charged upfront by lenders to cover their cost of assessing your application, conducting a credit check and administering the money transfer to your nominated account, the fee is generally in the $200 range.

 

5. Ongoing monthly fee - This fee is usually below $10 per month, which can easily be dismissed as not much, until you consider the total cost of this monthly fee across a 5 year loan term which could be as high as $600 assuming a $10 monthly fee.

 

6. Early repayment fee - Lenders would prefer your new car loan to run for its full term as that will generate them their greatest profit. When car buyers choose to repay their loans early this impacts the lenders profitability so to deter this they charge a fee when borrowers choose to repay their car loan out early. This fee is generally in the $100-$200 range.

 

7. Document release fee - Once you have repaid the car loan some lenders may charge you a document release fee to cover their administration costs of releasing any security they hold over your car loan.

 

8. Extra repayments - making extra repayments on your new car loan is a great way to reduce your overall interest charges on your loan, as every dollar paid down on your loan is one less which is subject to the daily interest rate charges. The option to make extra repayments is available on both fixed and variable rate loans and even if you can’t see any way that you’d be able to make extra repayments when you are 1st taking out the loan it’s wise to have this option included just in case your circumstances change which would facilitate extra repayments..

 

9. Redraw facility - If you have made extra repayments to your new car loan this facility enables you to access these extra repayments providing real flexibility on how you use your spare cash.

 

10. Flexible repayment schedule - Management of your Car loan repayments is a whole lot easier if your repayment schedule is in synch with when you receive your salary, so if you get paid weekly, look to structure your car loan so you can make weekly repayments. A benefit of repaying your loan weekly or fortnightly is that you will pay off an extra month by the end of the year. For instance if your fortnightly repayments are $250 (or weekly repayments are $125) at the end of the year you will have paid off $6,500. Whereas, with the $500 monthly option you will have only paid off $6,000 over a year.

 

 

Making a New Car Loan Application

 

If your credit report contains any issues such as CCJ’s you should seek to clear these up prior to making your new car loan application. Making applications when your credit report features some negative data will only make it harder to successfully apply in the future as declined applications are registered on your credit report and may negatively impact your credit score.

 

What do I need to apply for a new car loan?

To make a car loan application you will need to provide some details about yourself and some documentation to validate your identity and financial position:

Validating your ID

This is standard process when you apply for any type of credit from a lender be it a credit card, personal loan or in this case a car loan. Documents that will be required include:

  • Australian Drivers License
  • Australian Passport
  • Birth Certificate
  • Medicare Card
  • Address and contact details

You will need to confirm your residential address and contact phone numbers. Your residential address is likely to be used to conduct a credit assessment where the lender contacts a Credit Bureau to attain details of your credit history.

 

Credit Report Check

All lenders will conduct a credit report check to assess the probability that you may default on the car loan. Your credit report contains details of your credit history in terms of any previous and current loans and of how you are managing these, specifically in terms of making payments on time.

 

Proof of income

All car loan applications include a request for details of your income and expenses, lenders may request documents to validate the income levels you stated in your application, this will normally include wage or salary slips for the last 3 months.

 

Details of the car you wish to purchase

If you are using your new car as collateral you will need to provide details of the car including registration and engine number. If you are purchasing your car from a dealer you may need to provide their details so the lender can organize payment direct to the dealer.


Important information about this website

selectthebest.com.au is one of Australia's leading credit card comparison websites. selectthebest.com.au offers compared on this page are from our participating product providers. The Active Product List of products displayed on this site are not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms "Featured", "Best" and "Top" are not product ratings and are subject to our Terms and Conditions. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing products.

Frequently Asked Questions

Do car loans offered by the car dealers represent good value?

Many dealers will offer to sort out your car loan to make your purchase simple and quick, and new car dealers will frequently offer very low rate car loans. But do these dealer car loans offer good value?

In most cases the car loans offered by dealers are not as good value as their interest rates suggest as these low rates, which are often in the 1-2% p.a. range mask the fact that the rates are linked to the cars full list price and fully loaded delivery charges. So if you opt to take the dealers finance option it is highly likely that you will have no opportunity to negotiate on the car price, which can mean you will be paying in the region of 5-10% more than you would if you had negotiated.

Here's some tips when considering dealer finance for your new car: 

  • Ask how much the total repayments are over the life of the loan, regardless of the interest rate.
  • Compare the dealers low interest rate offer with what's available outside the dealership.
  • Ask if the low finance rate is linked to the price of the car, or is the price of the car negotiable as well.