The complete guide to car loans in Australia

At Wisr, we can help you find car loans for new, used or electric vehicles. To kick things off, here’s a quick rundown of what’s available so you’ll have a clear idea of what’s right for you and your finances.

Car loans in Australia mainly come in two forms: unsecured and secured. Both can help you get the car you’re after, but there are a few key differences. 

Unsecured car loans

An unsecured car loan is a loan that’s not secured against the vehicle you’re buying. You borrow a fixed amount of money to purchase a car and pay it back in regular instalments, plus interest. Simple.

• Wisr offers unsecured car loans up to a maximum of $64,000

• Repay over 3, 5 or 7 years

• Not secured against your car

• Can be used for new or used vehicles

• No restrictions on vehicle age 

Secured car loans

A secured car loan is a loan that’s secured against the vehicle you’re buying. This means that if you were to stop making your car loan repayments, your lender could repossess your car to recover their costs. However, with this extra security for the lender, you could benefit from a better interest rate or have the option to borrow a larger amount.

• Wisr offers secured car loans up to a maximum of $150,000

• Repay over 3, 5 or 7 years

• Secured against your car

• Can be used for new or used vehicles

• Possible vehicle age restrictions 

Electric / hybrid vehicle car loans

Thinking of buying an electric or hybrid vehicle? Go you! While electric or hybrid vehicles loans fall into either the unsecured or secured loan categories, you’ll find that the interest rates available can be a little better - because hey, doing your part is smart. 

So, pro tip - if you’re thinking of getting an electric or hybrid vehicle, make sure to select it as your loan purpose instead of car loan when getting a rate estimate. 

Using an unsecured car loan can have its perks. Here are a few benefits that come with this type of finance. 

• Spread the cost of your purchase in regular instalments 

• Own the car outright from the point of purchase 

• Can be used to pay for new or used vehicles 

• Can be bought privately or at a dealership

• No vehicle age or mileage restrictions

• Making regular loan repayments can boost your credit scores

Before taking out an unsecured car loan, there are a few considerations you should have on your radar.

• Lower loan amounts available compared to secured loans

• Interest rates may be slightly higher compared to secured loans

• Missing repayments could negatively impact your credit score

Think a secured car loan could be a better fit for you? Here are the benefits.

• You may be able to get a better interest rate with a secured car loan than with an unsecured car loan

• There are larger loan amounts available which could help you purchase a more expensive car

• Can be used to pay for new or used vehicles

• Can be bought privately or at a dealership

• Making regular loan repayments can boost your credit scores

Just like with unsecured borrowing, there are factors to consider before making this type of purchase. 

• You won’t own the car in full until you make your final loan repayment

• Your car could be repossessed if you stop making your loan repayments

• There are often restrictions on the maximum age of the car you can buy

• You will usually need to have a comprehensive insurance policy on your vehicle and it will need to be in good condition 

• There will be extra considerations if you want to sell your car before your loan is repaid 

• Missing repayments could negatively impact your credit score

Your eligibility for a car loan in Australia will ultimately come down to your credit score, income surplus (aka how much you have left over each month after your expenses have been deducted from your income) and - if it’s a secured loan - the condition of the vehicle you want to buy. 

It can also be a good idea to get a rate estimate before you apply. This will give you a good idea of your eligibility before you go ahead and submit a full application. At Wisr, getting a rate estimate doesn’t harm your credit score, so you can find out what your personalised interest rate would be with us at no cost to you.

Think it’s time to apply? Well, before you jump in and submit an application for an Aussie car loan, have a quick look at your credit score and see if there are any easy ways to improve it. 

• Check for any errors on your credit report - errors on your credit report can unnecessarily pull down your credit score - and no one wants that. Check it to make sure your credit history is all your own (i.e. no one has taken out a loan or credit card in your name), your personal details are correct (like your name and date of birth) and that you’re not linked to someone financially that you shouldn’t be (such as an ex partner). If you do spot an error, contact the relevant credit bureau to put it right. 
  

• Cancel any unused credit cards - in Australia, an open credit card in your name suggests to credit bureaus that you could potentially get into debt up to the credit limit on your credit card. Closing any credit cards that you don’t need will lower your liabilities and could improve your eligibility for a loan. 
  

• Avoid making lots of credit applications - it’s always a smart move to do your research before making a credit application. This is because making lots of credit applications in quick succession can lower your credit score. 
  

So, if your credit score isn’t that strong, you may want to have a look around to find lenders that cater for your credit profile rather than just applying with the first one you like the look of. Getting a rate estimate that only uses a soft credit check will also give you a good indication of whether you’ll be eligible with a particular lender. 

Have a little more time to prepare for your car loan application? Here are some other smart ways to improve your credit score over the long term.

• Built up a consistent credit history of making on time repayments for utility bills, phone contracts, credit cards and any other credit product you may have

• Never miss a repayment 

• Keep the number and size of your liabilities low 

• Limit the number of credit application you make 

Have a think about what is most important to you before you look at your car loan options. This will depend on your finance goals, your current situation and the car you’re hoping to buy.

• Repayment amount - this is how much you’ll have to repay on a regular basis. Being able to comfortably afford your monthly repayments is essential. Use a car loan calculator to give yourself a clearer idea of how much a loan will cost you each month and whether it will cause you any difficulty. You can also play around with the loan size and term to see how it affects the potential monthly repayment amount.

• Loan term - this is how long you’ll have to pay back your loan. At Wisr, we offer car loans over 3, 5 and 7 years. The shorter the loan term, the quicker you’ll pay off your loan and less interest you’ll pay your lender overall. The longer the loan term, the smaller your monthly repayments will be, which could make them more manageable. However, it will mean that you’ll pay back more interest in total. 

• Loan type - as we already covered, secured car loans and unsecured car loans both have their perks and considerations. The amount you want to borrow, the interest rate available to you and whether you want to own your car from point of purchase could all influence which option is better for you and your finances. 
  

• Fees and charges - make sure you’re aware of any associated fees and charges before you proceed with your car loan application. At Wisr, we don’t charge fees for extra repayments or repaying in full early, so if your circumstances change, you can settle up at no extra cost.

Although car loans are by far the most common form of car finance in Australia, there are some other options you can consider that could help you upgrade your vehicle. 

Salary sacrifice 

Salary sacrifice is a benefit that may be offered by your employer. It allows you to set up a novated lease deal where you pay for your car lease out of your income before income tax is applied. You also won’t have to pay goods and services tax (GST) on the full price of the vehicle, or on your car’s running costs. Plus, if you’re buying an electric or hybrid car in Australia, you won’t have to pay fringe benefits tax (FBT) on it either.

This setup could save you a lot of cash over the long term and the car can also be for personal use. Salary sacrifice deals often last for around 5 years. At the end of the lease, you can either renew it for the same vehicle or a new one, pay the outstanding amount to own the vehicle, or sell the car and pay off the outstanding amount.

Car leasing

Standard car leasing allows you to lease a car from a dealership for a fixed amount of time, often ranging from 2 to 5 years. You usually need to pay a deposit, then make regular payments over the term of the contract. 

The key difference with car leasing is that you won’t own the car once your lease agreement is over. Instead, you’ll hand the car back to the dealership and then you’ll need to arrange a new agreement or look for an alternative. 

Benefits of car leasing include the potential to drive vehicles you wouldn’t be able to afford to buy outright and it could allow you to regularly upgrade to newer models. The downsides are that you won’t own a car at the end of your contract and that there are often mileage restrictions and additional charges for wear and tear.

Remortgaging

Built up a lot of equity in your home? Well, you may have the option to take some money out of your home loan and use it to buy a car outright. This would allow you to purchase the car you’re after without having to set up a new finance contract with another lender. 

However, remortgaging early could move you onto a higher interest rate, costing you more in the long run. Taking equity out of your home is also likely to increase your mortgage repayments, so it’s essential that any changes you make to your home loan keeps it affordable. 

Credit card

Car retailers in Australia do sometimes accept credit cards as a form of payment. If your credit card has a high enough credit limit for you to make the full purchase, this could be an option for you. You could also benefit from earning yourself a whole load of points if your card has a rewards scheme.

However, if you aren’t able to repay your credit card in full within the monthly repayment period, it’s likely that you’ll be charged a high amount of interest. Plus, if you’ve borrowed a large amount, debt could build up fast. 

There are some credit cards with introductory 0% interest periods that would give you a little longer to repay what you owe, usually a few months. This could help you spread the cost and avoid paying interest. That said, if you don’t manage to repay the full amount, you’ll be charged the card’s usual interest rate on the full outstanding amount once the introductory 0% interest period ends. 

Savings

Have enough in the bank to pay for a new or used vehicle outright? If so, this would help you avoid any additional charges that can come with borrowing. You could also think about pairing some of your savings with a car loan to lower the total amount that you’d need to borrow. This could help you repay your loan quicker or lower your monthly repayments. 

It is worth bearing in mind though that emptying your savings account could make you vulnerable to financial shocks, such as unemployment or a relationship breakdown. Having a buffer available to support you in a change of circumstance could give you peace of mind.

So, now you know how you’re going to finance your car purchase, but have you factored in the other costs associated with owning a car? To make sure you’re fully prepared, make sure you’re aware of these vehicle expenses.

• Stamp duty - in Australia you need to pay stamp duty when you purchase a car. The cost of this one-off payment will depend on the price of the car, the type of car, quantity of emissions produced and the state you’re in. For more information, check out this guide to car stamp duty in Australia.

• Luxury car tax (LCT) - this payment is only applicable if the car you’re purchasing is worth over a certain amount.

• Vehicle registration - you’ll usually need to renew your car registration every 12 months.

• Car insurance

• Maintenance and servicing

• Fuel

Ready to go car shopping? Before you head out, here are our top tips for buying a car in Australia.

• Check your finance options before you go car shopping - although it can be tempting to just go with what the dealership offers you, you may find you’re eligible for a much better rate on a car loan from a lender. Do your research first so you know what’s available to you. 

• Stick to your budget - it can be tempting to overstretch yourself to get a better vehicle but it could cause you financial problems long term.

• Haggle on the price - you may not be able to get the price down, but it’s always worth asking, right?

• Do a rego check - a quick search online before you purchase a vehicle will tell you: the registration expiry date, whether the registration is suspended or cancelled, any registration restrictions, any registration concessions (additional charges that might apply when transferred to a new owner) and the Compulsory Third Party insurer and policy expiry date.

  Up to speed on all things car loans? Great. If you’d like to see if you can get a great deal on a Wisr car loan, just get a quick rate estimate now. It won’t affect your credit scores.