Compare Green Car Loan Rates

What is a green car loan?

A green car loan is one specifically for purchasing environmentally friendly vehicles, including:

• electric vehicles (EVs)
• plug-in hybrid EVs (PHEVs)
• low-emission vehicles that produce little or low carbon dioxide 

These loans typically come with lower interest rates and no (or low) fees compared to general car loans.

How does a green car loan work?

Green car loans work in much the same way as regular car loans.

They are available to purchase both new and second-hand cars in Australia, as long at the vehicle meets certain environmental standards.

Some lenders may also impose age restrictions on some second-hand vehicles.

Does a hybrid or EV qualify for a green car loan?

EVs and PHEVs almost always qualify for a green car loan but it is up to individual lenders to determine what other vehicles are eligible. This is generally assessed according to:

• vehicle type (EVs and PHEVs qualify while some lenders - not all - may also include conventional hybrid vehicles)
• emissions thresholds (can vary by lender)
• approved list (this can also vary according to lenders)

Many lenders will be guided by the federal government's Green Vehicle Guide. 

Pros of green car loans

As the federal government is keen to get Australians into lower-emission vehicles, green car loans can come with many enticements, including:

• Lower interest rates: Green car loans generally have interest rates 0.5-!% lower than regular car loan interest rates
• Reduced fees: Many green car loans come without any application, monthly maintenance, or early payout fees
• Can cover additional costs: Some green car loans will also cover the cost of a home-charging station
• Often come with flexible features: These may include unlimited extra repayments and redraw facilities
• Higher loan limits: Borrowers may be offered higher loan amounts, some up to $150,000, for premium EV models
• Environmental benefits: Taking out a green car loan means you are helping to save the planet
• Thrown-in perks: Some lenders may offer additional benefits such as free or discounted roadside assistance for a period

Cons of green car loans

There are also a few downsides to taking out a green car loan - many linked to purchasing a green vehicle. You may want to consider:

• Higher purchase prices: Although you'll be going green, there's no escaping many green vehicles are more expensive than conventional models, meaning a higher loan amount
• Strict eligibility requirements: Lenders will have their own definition of 'green' and most generally limit green car loans to vehicles less than seven years old
• Limited model choices: Some lenders may lend for EVs only, or only select PHEVs, narrowing your purchase options
• Longer loan terms: To make green loans more affordable given more expensive purchase prices, some lenders may offer extended loan terms which can see you pay more interest overall
• Limited choice of lenders: Not all lenders offer green car loans, making the pool smaller when comparing options
• Depreciation and resale risk: The EV market is rapidly evolving, leading to uncertainty about future resale values
• Vehicle reliability concerns: Some more affordable EV options have raised questions on reliability

What are the benefits of owning a green car?

There are a number of benefits involved in driving a green car – both for the environment and the owner. In particular, green cars:

• can reduce the interest rate on your car loan, saving you money over the course of the loan
• produce fewer emissions, which reduces the amount of CO2 released into the environment
• create less noise than regular vehicles with sole combustible engines
• will save you money on the cost of fuel as they are more fuel efficient (which means fewer stops at the fuel station)

Do green car loans always have lower interest rates?

Yes, you will almost always get a lower interest rate purchasing a green vehicle than a conventional vehicle.

This is because many green car loans are supported by government initiatives which ultimately aim to help reduce Australia's carbon emissions.

The lower interest rates essentially act as an incentive to consumers to purchase a green alternative to a conventional product. 

Case study

1. Savings.com.au’s two cents

For some people, the benefits of discounted interest rate and fuel efficiency of green cars outweigh the higher purchase price. At the end of the day, it depends on your personal financial situation.

Who offers car loans for green cars, EVs and hybrids?

Of the big four banks, Commonwealth Bank and Westpac offer specialised green car loans. NAB also offers a discounted car loan for EV and PHEVs, partnering with fintech lender Plenti to provide specialised green car loans (at the time of writing).

Other regional and smaller banks providing green car loans include Bendigo Bank, Great Southern Bank, Community First Bank, RACQ Bank, MOVE Bank, People's Choice, Horizon Bank, and Bankfirst.

Non-bank lender Firstmac also offers green car loans.

What cars can you buy with a green car loan? 

Each lender will have its own parameters of what vehicles qualify for a green car loan or what requirements must be met. These can generally be found on individual lenders' websites.

Sometimes the requirements may be expressed in terms of the vehicle's emissions, measured in grams of carbon dioxide emitted per kilometre. Lenders typically consider green vehicles to be those emitting less than 120g/km although some can be as low as 75g/km.

Many lenders are guided by the federal government's Green Vehicle Guide although some lenders may also accept conventional hybrid cars as qualifying for a green car loan.

It's also worth noting some lenders may only finance new EVs or PHEVs while others will extend loans for qualifying vehicles up to seven years old. 

See also: Green cars in Australia: EVs, PHEVs, costs, and loan rates

How can you apply and qualify for a green car loan?

This will differ slightly according to the lender but applying for a green car loan involves much the same process as applying for any car loan. 

The extra step is in establishing the vehicle's green credentials and ensuring they meet the lender's criteria to qualify for a green car loan.

Here's a general rundown of what to expect:

• Check the eligibility of the vehicle you wish to purchase: Many lenders will have a list of eligible 'green' vehicles or their specific qualifying requirements on their websites.
• Research the green car loan market: As with any loan, you need to ensure you find the best interest rate and loan features to suit your individual needs
• Apply to your chosen lender: This can generally be done online and will involve providing personal details, identifying documents, income and other financial details, including assets and liabilities
• Verify the vehicle: Provide make, model, registration, engine number, etc. and whether the vehicle is new or second-hand
• Approval and settlement: If the loan is approved, you will sign the loan contract and the lender will forward the funds to the seller

See also: How do car loans work?