Best New Car Loan Rates from 6.24%

What is a new car loan?

On the lookout for a new car but don't have quite enough savings to purchase the vehicle upfront? Taking out a car loan could be your next option.

A new car loan is a type of personal loan that allows you to finance a brand new car that's under a certain age, typically five years old.

When you take out a new car loan, the lender will either cover the entire cost of the vehicle, or the remaining amount required after you've paid a deposit. Either way, you'll sign an agreement with the lender to repay the loan amount (with interest) in regular installments (weekly, fortnightly, or monthly) over a set period of time.

As part of the loan approval process, your lender will typically need to know which car you'd like to buy so they can assess its value. However, there are some lenders out there that can offer pre-approval for a new car loan, similar to that of a home loan. After you've found your dream car, the lender does all the checks and balances so you can get your mitts on the keys in no time.

New car finance deals

When scouring the market for a new car loan, it's important to note each lender will offer features unique to their product offerings. Selecting a car loan that's right for you means selecting one that fits your financial position. To find the best finance deal for a new car, keep the following in mind:

Interest rate

Weigh up the interest rates from different lenders and find the right option for you. Don't forget to look at the fixed and variable rates, plus the comparison rate to get a better idea of the total cost of the loan. The comparison rate factors in both the interest rate plus any fees payable.

Fees

Check whether the lenders have any upfront and/or ongoing fees (and if so, the cost) that may be charged to you such as:

• Annual or monthly account keeping fees
• Fees for missed payments or early repayments
• Loan application fees
• Exit fees

Loan term

This is the length of time you have to pay off the new car loan, plus interest. New car loans typically have loan terms of three to five years. Seven year car loans are also making up a bigger proportion of the market. However, five year loans are arguably the most popular. This is because they offer a suitable blend of both a manageable payment and interest paid over the life of the loan. The shorter your loan term, the less interest you'll ultimately pay. However, the trade-off is you'll have a higher weekly, fortnightly, or monthly payment. This can make budgeting around the car loan harder. The general rule of thumb when looking at a car loan term is to pick the shortest one you can budget.

Unsecured vs secured loan

Another thing to be wary of is if your car finance is secured or unsecured. Secured car loans use the car as security against the loan… as you might have guessed. This means that if you default on the loan, your lender may repossess your car. Unsecured loans, on the other hand, do not do this, and if you fail to pay, they may come after you in another fashion. Plus, they generally have a higher interest rate. A trade-off with a secured loan is that often the interest rate is much lower to compensate.

Extra features

Some lenders may offer extra features with their new car loan such as the option to make extra fee-free repayments, and a redraw facility that allows you to withdraw any additional repayments in the likelihood of an emergency. Other appealing features may include fast approval times or balloon repayments.

How to get a low interest rate on a new car loan

Here's a few things you can do to maximise your chances of getting a lower rate for your new car loan:

• Have a good credit score: Many lenders offer tiered rates, which can be based on your credit score. The higher your score, the lower your interest rate is likely to be. Note that you don’t necessarily need a lengthy credit history to have a good score, but any line of credit you apply and get rejected for can reflect badly on your credit score. Many agencies allow you to check your credit score for free once per year.
• Get a secured car loan: A secured car loan means that if you default on the loan, your lender may repossess your car. However, a secured car loan can come with a lower interest rate.
• Have a deposit or choose a balloon: If you’re willing to front up with a deposit, this will lower total interest paid over the life of the loan. Conversely, a balloon payment is similar, only it’s applied at the end of the loan, and can be around 30% of the car’s value. If you’re opting for a balloon, make sure you budget for it to avoid a nasty surprise three, five, or seven years later!

Aside from that, it pays to shop around. Don’t just stick to dealership finance or the big banks - there are lots of lenders out there worth taking a look at.

Used car loans vs new car loans

New cars depreciate, and can depreciate rather quickly. This is why it’s feasible to look at a near new or demonstration vehicle that’s already taken a hit of depreciation, while getting into a relatively new vehicle. However, new car loans are typically restricted to cars that are either brand new or only two or three years old at most. This is where used car loans step in.

Used car loans are typically for cars up to around seven years old, and the biggest bonus is that in a lot of circumstances the interest rate is the same or similar to the equivalent new car loan. You can compare a range of fixed used car loans below.