Australians borrow billions for car purchases each year — and most pay more than they need to. Here's how to finance your next car smartly in 2026.
| Loan Type | Rate Range (p.a.) | Best For |
|---|---|---|
| New car — secured | 5.99% – 10.99% | New vehicle purchases |
| Used car — secured | 6.99% – 14.99% | Cars under 7 years old |
| Dealer finance | 7.99% – 19.99% | Convenience (often expensive) |
| Personal loan (unsecured) | 8.99% – 24.99% | Older vehicles |
| Novated lease | Pre-tax savings | Employees with salary packaging |
Dealer finance is convenient but frequently expensive. Dealers often receive a commission (called a "dealer margin") for arranging finance, which is built into your interest rate. This was more heavily regulated by ASIC in recent years, but dealer rates often still exceed what you'd get independently.
New car loans typically have lower rates because the asset is worth more and easier to value. For used cars, lenders become more cautious as the vehicle ages. Most lenders won't provide a secured car loan for vehicles older than 10-12 years — you'd need an unsecured personal loan instead, at a higher rate.
A novated lease is an arrangement between you, your employer and a finance company. Repayments come from your pre-tax salary, reducing your taxable income. In the right situation — particularly for higher income earners driving a new car for both work and personal use — a novated lease can save thousands per year versus a traditional car loan.
However, novated leases are complex, involve balloon payments, and require your employer's participation. They're not suitable for everyone.
Yes, if you can. A deposit reduces the loan amount, which reduces your repayments and total interest paid. It also improves your LVR (loan-to-value ratio), which can help you qualify for a lower rate. Even 10-20% deposit makes a meaningful difference.
Most mainstream lenders want a score above 600. Scores above 700 will get you the best rates. If your score is below 550, you may need a specialist lender at a higher rate, or a guarantor. Check your score free before applying.
Variable rate car loans — usually yes with no penalty. Fixed rate loans may have early repayment fees. Check your contract carefully. Paying off early saves significant interest, especially in the early years of the loan.
Contact your lender immediately. Most Australian lenders have hardship provisions under the National Consumer Credit Protection Act. Don't wait until you've missed payments — proactive communication often leads to repayment arrangements that protect your credit file.