It’s no secret that cars can be expensive. When you factor in buying your new wheels, getting it on the road, and forking out for registration, insurance, and running costs, it's no wonder that so many Aussies consider getting a car loan when they’re in the market for a new ride.
If you were eyeing off a Toyota Hilux, Ford Ranger, or Tesla Model Y – all popular choices for new car buyers – you’ll probably be forking out tens of thousands of dollars. That’s where a car loan can come in handy.
Like home loans, car loans see a lender providing a borrower with a set amount of cash to purchase an item – in this case, a car. After they do so, the borrower will pay back the cash, plus interest, over a set period of time – typically between one and ten years.
How much can you borrow with a car loan?
How much you might be able to borrow with a car loan will depend on many factors, such as your credit history, regular income, and the type of car you’re hoping to buy.
Typically, a lender will allow you to borrow a certain percentage of a car’s value. However, most lenders only offer car loans of between $10,000 and $100,000.
If you’re not after quite that much, a smaller
What is a balloon payment?
If you’ve used Savings.com.au’s Car Loan Calculator, you likely saw the little section marked ‘balloon payment’.
A balloon payment is essentially a portion of a loan that a borrower doesn’t pay off until the end of the loan’s life. When it comes to car loans, balloon payments typically represent between 30% and 50% of the loan’s value.
CASE STUDY
Mary (32) lives in Perth, barracks for the Geelong Cats, and is the proud owner of a brand new MG ZS. Her snazzy new car cost her $24,000 and she took out a car loan to pay for it.
Mary signed up for a three-year secured car loan with a 7.5% interest rate. That would typically demand $746.55 a month in repayments. However, she’s hoping to save for an oversees holiday next year.
For that reason, she decided to snap up a loan with a 35% balloon payment, reducing her monthly repayments to $537.76. She reckons she can start saving again when she returns from her trip and have enough to cover the payment – which will come to $8,400 – by the time her loan expires.
While Mary has managed to reduce her regular repayments, she’ll also likely pay more interest over the life of her loan as her outstanding balance will remain higher for longer.
She’ll also face a ‘pop’ moment at the end of the three years when she’s asked to pay back the $8,400 in full – which could come as a shock if she’s not careful.
Fixed or variable rate car loans?
Beyond how much you want to borrow and how much you can afford to repay, there are a few other decisions that you’ll probably need to make when choosing a car loan.
Arguably the first is whether you want a fixed-rate loan or a variable-rate loan. Let’s break it down.
A fixed rate loan means your interest rate will stay the same for the duration of your loan, or for an agreed-upon time. That can provide peace of mind and potentially save you a decent chunk of cash, as your repayments likely won’t go up if interest rates rise after you’ve signed on.
On the other hand, the interest charged on variable-rate loans might fluctuate from time to time. That could be helpful if interest rates are lowered during the life of your loan, as your repayments could be reduced as a consequence.
Current Car Loan Offers
| Lender | Car Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Interest Type | Vehicle Type | Maximum Vehicle Age | Ongoing Fee | Upfront Fee | Total Repayment | Early Repayment | Instant Approval | Online Application | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 7.07% p.a. | $579 | Variable | New | $8 | $400 | $34,749 |
| Promoted | Disclosure | |||||||||
5.67% p.a. | 6.10% p.a. | $575 | Fixed | New | $0 | $350 | $34,524 |
| Promoted | Disclosure | |||||||||
5.95% p.a. | 5.95% p.a. | $579 | Fixed | New | $0 | $0 | $34,757 |
| Promoted | Disclosure |
