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Car Finance Tips for Australian Buyers

Get Pre-Approved First

Having pre-approval from a bank or broker before visiting a dealer gives you a benchmark rate. Dealers often charge more for their in-house finance — knowing your pre-approved rate gives you leverage to negotiate.

New vs Used Rates

New car loans attract lower interest rates than used car loans — typically 1-3% lower. Lenders see new cars as lower risk due to warranty and known condition. Factor this into your total cost comparison.

Balloon Payments — Beware

A balloon payment reduces your monthly payments but increases total interest paid and creates a large lump sum at the end. Only use balloons if you plan to sell or trade the car before the balloon falls due.

EV Loans — Green Incentives

Some Australian lenders offer "green car loans" at lower rates for electric vehicles. Check for EV-specific loan products when financing an electric or plug-in hybrid vehicle.

Comparison Rate Matters

Always compare the comparison rate (not just the advertised rate). Establishment fees, monthly fees, and other charges are included in the comparison rate — this is the true annual cost of the loan.

Check Private Sale vs Dealer

Private sale cars are often cheaper, but some lenders restrict car loans for private sales or charge higher rates. Check your lender's policy before buying privately — some require a roadworthy certificate.

Car Loan FAQ — Australia 2026

What is the best car loan rate in Australia in 2026?
The most competitive car loan rates in Australia in 2026 start from around 5.5-6.5% p.a. comparison rate for new vehicles with good credit. Used car loans typically start from 7-8% p.a. Rates vary significantly based on your credit score, loan term, vehicle age, and the lender. Always compare the comparison rate (which includes fees) rather than the advertised rate.
How much can I borrow for a car loan in Australia?
Most Australian lenders offer car loans from $5,000 to $100,000 or more. The amount you can borrow depends on your income, credit score, existing debts, and the vehicle's value. Lenders typically won't lend more than the vehicle's market value. For very old vehicles (10+ years), some lenders have restrictions or won't lend at all.
Can I get a car loan with bad credit in Australia?
Yes — there are specialist lenders offering car loans to borrowers with poor credit, though rates will be significantly higher (often 15-25%+). A larger deposit, a co-borrower with good credit, or a secured loan against a different asset can all help. Consider working on improving your credit score first if possible — even a 6-12 month improvement can significantly lower your rate.
Is dealer finance or bank finance better for a car loan?
Bank and online lender finance is generally cheaper than dealer finance in Australia. Dealer finance may offer 0% or low introductory rates occasionally, but these are usually offset by a higher car price. The best approach is to get pre-approved by a bank or online lender first, then see if the dealer can beat it. Always compare the total cost over the full term, not just the monthly payment.
Can I pay off my car loan early?
Most Australian car loans can be paid off early, but some lenders charge an early repayment fee — typically 1-2 months interest. Check the loan contract for early exit fees before signing. If you plan to pay extra regularly or pay out early, specifically look for loans with no early repayment penalties when comparing lenders.
Do I need comprehensive car insurance for a car loan?
Most lenders require you to maintain comprehensive car insurance for the life of the loan, as the vehicle is the security for the loan. If the car is written off or stolen, the insurance payout goes toward repaying the loan. Some lenders also offer or require Guaranteed Asset Protection (GAP) insurance to cover any shortfall between the insurance payout and loan balance.